October 10, 2006 6:13 AM
How To Rebuild Poor Credit? Things To Do And Not To Do
Many Americans continue to find themselves in a credit muddle. For a variety of reasons, they can’t obtain credit while they try to rebuild a ruined credit rating. Here are some things that lenders look at, and some suggestions for how you can make yourself appear more creditworthy to potential creditors.
What Not to Do
Although many people think that the best way to begin rebuilding credit is to apply for many new credit cards, that practice may actually hurt your chances. The reason is that credit card companies may assume that since you’ve applied for many cards, you may have been issued a number of them, which could mean a potentially higher debt load in the future. On the other hand, they might look at the fact that many of the cards weren’t issued, which could mean the other companies didn’t trust you to make your payments. Either way, you lose, so be selective in applying for cards, and space out your requests rather than making a bunch of them in a short time.
Of course, creditors also look at the types of black marks that show up in your credit history. From best to worst, the things that will hurt you most are: payments that were late by 90 days, IRS liens, court judgments, accounts that were turned over to collection agencies, accounts that were charged off as uncollectible, repossessed goods or merchandise, real estate foreclosures, and bankruptcies.
What to Do
Creditors such as banks also look favorably at things like having a savings and/or a checking account with their institution, having a telephone in your own name, whether or not you own your home, and how long you’ve been at your current address. They’re looking for stability before extending credit.
Lenders also calculate your present debt ratio to see if you can take on more debt. They’ll generally add up all your monthly bills (not including rent/mortgage or utilities) and divide that number by your gross monthly income. If your ratio is more than 35%, they probably won’t extend you credit. You can help lower that figure by consolidating your debts, which will lower your monthly payment and decrease your debt ratio, which will give you a better chance to qualify for credit, even though it won’t reduce your actual overall indebtedness.
If you’re turned down for credit, you have the right to know why. The law says that creditors must provide specific reasons and the name and address of the credit bureau they used to make their decision. If the reasons your rejection doesn’t sound right, obtain a copy of your credit report from the bureau that the creditor used and check it for errors. You have the right to request a free copy of the report that caused you to be rejected. If you find errors, there are ways you can have them changed. Then contact the creditor again and explain the error. You just might be extended credit the next time.
Remember, lenders are in business to make a profit, so they must screen all potential borrowers carefully. However, once you know what they look for, you can make an effort to address those things in order to make yourself appear more creditworthy. Take one step at a time to rebuild poor credit.Source: EZine
01/31/07 | When It Is OK To Use Credit Card To Pay Off Home Equity Loan
01/09/07 | How To Negotiate A Lower Credit Card Rate
01/02/07 | 2007 Credit Card Trends
11/15/06 | Featured Card: Citi Driver’s Edge Platinum Select Card
10/27/06 | OptionXpress Offers Affiliated Credit Card
10/27/06 | American Express Launches Event Ticket Protection Plan
10/22/06 | How To Close Credit Card Properly?
10/20/06 | Kiplinger: Best Credit Card Choice In Every Category
10/20/06 | How Corporate Credit Card Can Hurt Your Credit Score
10/14/06 | How Many Credit Cards Should You Have?
10/11/06 | Credit FAQ: Who Can Look at Your Credit Report?
10/11/06 | Credit FAQ: What Information Is Included In A Credit Report?
10/11/06 | Credit FAQ: What Is Promotional Inquiry?
10/11/06 | Credit FAQ: What Is Security Freeze?
10/11/06 | Credit FAQ: What Is Soft Inquiry?
10/11/06 | Credit FAQ: What Is Loan-to-Value Ratio (LTV)?
10/11/06 | Credit FAQ: What Is A Hard Inquiry?
10/11/06 | Credit FAQ: What Is Fraud Alert?
10/11/06 | Credit FAQ: What Is Equal Credit Opportunity Act (ECOA)?
10/11/06 | Credit FAQ: What Is Fair Credit Reporting Act?
10/11/06 | Credit FAQ: What Is Credit Reporting Company?
10/11/06 | Credit FAQ: What Is Co-Signer?
10/10/06 | Key Benefits Of Frequent Flier Credit Cards
10/10/06 | Things To Look For In Student Credit Cards
10/10/06 | What’s The Difference Between Unsecured And Secured Credit Card?
10/10/06 | Use Secured Credit Card To Establish Good Credit History
10/06/06 | Credit Card Delinquency At Its Lowest Since 1994
10/06/06 | GE Retail Consumer Finance Issues ShopNBC MasterCard
10/05/06 | Types Of Credit Card Fees: More Than You Can Imagine
10/05/06 | One Card, Multiple APRs
10/05/06 | How Long Is The Credit Card Grace Period?
10/05/06 | How Can I Improve My Credit Score?
10/05/06 | Credit FAQ: What Is A Good Insurance Credit Score?
10/05/06 | What Is “Credit Scoring”?
10/05/06 | How Many Credit Cards Do You Really Need?
10/03/06 | Good Credit Behavior Has Long Shelf Life
10/02/06 | Now All Secured Cards Help Credit Rebuilding
10/02/06 | Paying Back Credit card Balance In Small Chunks Does Not Help Credit Score
10/01/06 | Credit FAQ: What Is Garnishment?
10/01/06 | Credit FAQ: What Is Obsolete Information?
10/01/06 | Credit FAQ: What Is FICO Score?
10/01/06 | Credit FAQ: What Is Discretionary Income?
10/01/06 | Credit FAQ: What Is Credit File?
09/28/06 | Best Buy Reward Zone MasterCard
09/25/06 | How Is VantageScore Determined?
09/25/06 | How To Dispute A Credit Card Charge?
09/21/06 | Credit FAQ: What Is Cash Advance?
09/21/06 | Credit FAQ: What Are Consumer Credit Counseling Service (CCCS)?
09/20/06 | Featured Card: Citi mtvU Visa Card for College Students
09/20/06 | Featured Card: Starwood Preferred Guest Credit Card from American Express
09/20/06 | Featured Card: Discover Platinum Clear Card
09/20/06 | Featured Card: American Express Blue Cash for Business Credit Card
09/19/06 | Merchant-Specific Credit Card Reward Gets Trendy
09/15/06 | Walmart To Enter China’s Credit Card Market
09/14/06 | Why Credit Scores Are Important
09/14/06 | How to Raise Your Credit Score
09/13/06 | What Should You Do If Your Credit Card Is Lost Or Stolen?
09/13/06 | Should You Sign On The Back of Your Credit Card?
09/13/06 | Use Credit Card To Make Downpayment
09/12/06 | How To Use A Credit Card To Establish Good Credit?
09/11/06 | New MasterCard Aims For The Riches
09/08/06 | Bad Credit Can Cost You A Dream Job
09/05/06 | How Can You Manage Your Credit Wisely?
09/04/06 | Alarming Credit-Card Tricks #1 – Applying for a Mortgage? We’ll Bump Up Your APR
09/04/06 | Earn 20%, Guaranteed
09/04/06 | The Best Cash-Back Credit Cards
09/04/06 | How To Maximize Your Credit Card Rewards
09/04/06 | What Is Two-Cycle Billing?
08/29/06 | Pay The Minimum On Credit Card Bills Will Cost You (A Lot)
08/26/06 | Credit Card Protection Plan? Better Not!
08/23/06 | SmartMoney: 10 Things Your Credit Card Company Won’t Tell You
08/22/06 | Citigroup Reduces Cashback Incentive
08/21/06 | Featured Card: One from American Express
08/21/06 | Featured Card: CitiBusiness PremierPass Card
08/20/06 | Credit Card Sales is Growing Rapidly
08/15/06 | Credit Card May Be Refused in the UK
08/14/06 | Contactless Payments
08/14/06 | Reward Plan Downgrade at Amex
08/14/06 | 4 Ways to Snag the Best Reward Card