Think Of Credit Like School

Category: Finance, Credit.

We' ve all had times of uncertainty in our lives.

During these times bills pile up, automobiles repossessed and, payments are missed houses foreclosed. Job loss, divorce, medical problems, a death in the family and other life- changing events can all be factors in creating financial distress. If we are able to recover, scars are left on our credit report to remind us of the financial hardship we endured. Living off the grid might seem like a safer place to be but then life happens again and we want to buy a house or a car. Most people give up, hoarding cash under their mattress and swearing off credit cards forever. There is a sudden desire to rekindle our credit but the task seems daunting. The good news is that the credit system is set- up to give us a do- over.

How can we begin rebuilding our damaged credit? There are two main factors in rebuilding credit. The old saying" time cures all" is alive and well in the credit world. First, time is on our side. Collections that are older than two years have only a small impact on our credit score. Second, we must re- establish positive credit history. Late payments and other derogatory items fall off a credit report after seven years.

This is the part that most people struggle with. Think of credit like school. The knee- jerk reaction is to stop all credit activity, keeping credit lines, however open and building positive payment history can accelerate your credit score. You can barely pass high school but go on to graduate with honors in college. Creditors think the same way, your most recent credit has the highest impact on their perception of your ability to repay debt. Employers don' t care what you did in high school if you graduated Suma Cum Laude in college.

So how do we begin our journey to credit re- birth? This will not impact the owner's credit. Here is a list of the basic activities you can perform to begin rebuilding your damaged credit: Get added as an authorized user on a family member's credit card that will has a good payment history. Remove your name from authorized accounts that hurt your score. Take out a secure credit card- ask your bank how. Take out a small title loan or installment loan for an automobile or other personal property.

Do not contact consumer credit counseling companies. Don' t forget, time is on your side: o Inquiries made by creditors fall off your report 2 years from the reporting date. o Late payments fall off 7 years from the reporting date. o Bankruptcy and foreclosure falls off 10 years from the reporting date. These types of companies are viewed similarly to a bankruptcy by the credit bureaus. In my experience, rebuilding damaged credit can be a fairly simple and short process if you get sound advice and are willing to spend a little time.