How do you obtain credit if you have a bad credit history?

Answer 1

The basic steps needed to obtain credit (get your good credit back) are as follows (not in any particular order):

* Obtain a credit report and examine for inaccuracies. If you discover claims that are false, contact each agency and:

• Keep a record of all correspondence.
• Write a letter to each agency disputing the inaccuracies.
• Notify the business that reported the false claim in writing and tell them that you are disputing it.
• Request that the agency contact the business so that the dispute can be resolved.
• Make sure that a record of your disputes is included in future credit reports.

* Pay off what you owe and make payments on time for housing, car and utilities. Make sure that you keep letters from companies that you pay off that debt is paid in full. Send copies to credit bureaus if the correct "paid" does not show on the account. Keep in mind that if you call the company and offer to settle for an amount, you will not get the preferred "paid" notation. Avoid doing anything at all with the ones that the company has written off since you will restart the clock on the statutes and collections will start calling. A nonprofit credit counseling company can often help with the process, but try to keep payments under your control.

* Do not buy things you cannot afford to pay off with that month's paycheck.

* Get a secured credit card (the card balance is secured by a deposit that you give the lender) and use the card, making payments on time and in full throughout a two year period.

* Get an installment loan of some sort with a co-signer (having better credit than you) to guarantee the loan. Make payments on time until the loan is paid off. THIS IS NOT RECOMMENDED - If you cannot get the credit on your own, it means that your expenses exceed what you can pay. That means you are putting another person at risk financially,

The first step to finding the best rates on a credit card is getting a copy of your credit report from each credit bureau. Lenders rely on the credit reports from 3 main credit agencies to determine your credit-worthiness, and the rates that you will pay on borrowed money. These agencies are: Experian, Equifax, and TransUnion.

Secured vs. Unsecured Credit Cards, Which is Best For Your Situation?

There is no stock answer that will work for everyone on this. The particulars of each person's situation will dictate which option will work best for them but here are some facts to inform your decision:

Secured Credit Cards

Secured credit cards are cards that are issued from banks or credit unions that guarantee a specific line of credit as long as you have a corresponding balance in your account that they can use as collateral if you default on a payment. For example, if you have a $500 line of credit, you must maintain a balance of $500 in your account.

Because your debt is secured by a predetermined amount, you can generally get a more favorable rate of interest from these lenders. But, it is recommended that you pay the full balance each month to keep your account in good standing. Look for a card that will offer the option of becoming unsecured after a period of responsible use.

Unsecured Credit Cards

Unsecured credit cards are easily available from all sorts of lenders and there lies the rub, easy availability. These cards offer huge come-ons about increased lines of credit without the need to maintain a balance, but you run the risk of repeating some of the same mistakes that may have contributed to your bankruptcy in the first place.

In fact, there are many credit card outfits out there that specifically target people that have filed for bankruptcy and take advantage of this by offering egregiously high interest rates. Also, they further leverage their position by nickel and diming you with all sorts of limits, late fees, over the limit fees and other fees meant to prey on your financial vulnerability.

Also, make sure that you do not apply for more than 1 or 2 different credit cards. Each rejection will negatively affect your credit rating, and defeat the purpose of getting a credit card in the first place.