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What Happens When Your Credit Is Damaged? Do You Have
Recourse?
The good thing about bad credit is that you can fix it. If you
start now, over time, your bad credit can turn into good credit,
and you could qualify for the loans you want at the rates you
want. The most important aspect of rebuilding your credit after
it has been damaged is showing lenders and creditors that you are
serious about repaying your debt and that you can be a reliable
borrower over a significant period of time.
Negative account histories remain on your credit report for up
to 7 to 10 years, depending on the type of action. Bankruptcy can
stay on your report for up to 10 years, and collections drop off
after 7 years.
Advice varies widely as to the best methods to rebuild your
credit. Some points most experts agree on include:
? Starting small - Don't be intimidated by large debt amounts.
Even small payments, made on a regular basis, will improve your
payment history and, eventually, your credit score.
? Spending less than you earn - Borrowing money to finance a
lifestyle that is beyond your means will only land you deeper in
debt.
? Paying your bills on time - Building credibility as a borrower
involves meeting your commitments to pay, early if possible.
? Keeping your balances low - When using your healthier or newer
accounts, keep the balance that you owe between 25% and 50% of
your line of credit. An average of 30% is suggested.
? If your credit is damaged by circumstances such as divorce or
possibly identity theft or fraud, do something about it. Go to
www.creditdamage.com for more information.
Other tips might not seem related to your credit score.
Staying at least two years on the same job demonstrates steady
employment, and you appear more stable to lenders. You can also
open an emergency savings account. Contribute to the account a
little at a time on a regular basis. This will not only appear as
positive activity to lenders, but also will serve as reserve
money to keep you from charging unexpected expenses. Finally,
stop borrowing for a while. Certainly avoid borrowing more money
from home equity or other lines of credit to pay off credit card
debt. Shuffling the debt does not make it disappear.
When establishing new credit, it may be necessary at some
point to open a new account once you have paid down your existing
ones. Credit unions usually offer the best deals to people with
damaged credit. If you are unable to qualify for a credit card,
try a smaller company, such as a department store or gas station
that might offer you a line of credit.
You may want to look into getting a secured credit card.
Offered by several banks and credit unions, secured credit cards
are a positive way to show lenders that you can pay bills on time
and be trusted with credit. To use a secured credit card, you
will deposit a sum of money into a savings account and pay a
small yearly fee to the institution offering the card. If you
deposit $500, you will have a line of credit up to $500. Using
your card on a regular basis and paying it off monthly in full
could lead to a traditional line of credit. Once the bank or
credit union sees that you are capable of maintaining your
secured account, they may extend an offer to you with a fair
interest rate.
Another option is to have a friend or relative co-sign for a
line of credit with you. This step is risky because you are not
only gambling with your loved one's good credit, but also with
their good faith.
After a few months of good behavior, order copies of your
credit report from all three credit agencies and check for
improvements or errors. Be sure that negative information that
you have remedied has been removed. File any complaints in
writing and check your report again in a few months to ensure
that the changes have been made.
Repairing damaged credit is time-consuming but well worth it,
both to your peace of mind and to your pocketbook.
Cathy Taylor is a marketing consultant with over 25 years
experience. She specializes in internet marketing, strategy and
plan development, as well as management of communications and
public relations programs for small business sectors. She can be
reached at Creative Communications: creative-com@cox.net or by
visiting http://www.creditdamage.com or
http://www.internet-marketing-small-business.com
MORE RESOURCES:
Credit - Google News
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