Having bad credit can be a stigma that follows you around for years. Once an item is reported on your credit report as being in arrears, or slow to pay, you can have a terrible time getting your score back in shape in order to qualify for loans. You can add points to your credit score rapidly by following some insider tips for those that have bad or damaged credit files.
Secured Loans
A great way to boost your credit score is to take out a secured loan. This type of loan will need some type of collateral backing it up with the lending institution that you choose to use.
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Great collateral is to be found in your home, car, boat, RV, etc. Collateral needs to be something that you have a clear title or deed to. The lending institution will approve your loan in an amount that is equal to or less than the collateral that you provide on the loan application.
For example, if your automobile blue books for $10,000, the lender would likely approve a loan up to that amount. Use the proceeds from your secured loan to repay your new loan. This can best be accomplished by putting the money from your new secured loan into an interest-bearing savings account.
Secured Credit Card
Your next step is to obtain a secured credit card. This type of card is easy to get. Most issuers of secured credit cards are more than happy to approve you. You will be asked to place a deposit with the issuer that is equal to the amount of credit that you wish to be extended to you. You will then use the card as you would any regular card. Each month, it is best practice to leave a small balance (perhaps 20% of your available credit) while paying off the remainder.
Doing this will add points to your credit score while leaving you some open credit for emergency usage. Some financial advisors suggest that you use a card like this to purchase things that you ordinarily would have to buy either way, such as gasoline or food. Paying for necessities once each month when you get your credit card statement makes it easy to see how much you are spending for certain items, as well as help you rebuild your credit file. Some secured credit cards feature monthly reporting. These types of cards are the fastest to help you rebuild your reputation as an excellent borrower.
Be Selective
Only apply for loans or credit cards that you have a good chance of being approved for. Multiple applications or inquiries show up on your credit report. That means that potential lenders can see how many times you've been turned down lately, as well as the intensity of your applications. Applying for credit can take points away from your score. The best sources to receive either secure loans or secured credit cards are found online. Apply online with a reputable lender who specializes in bad credit for the greatest chance of approval.
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