Credit Repair Course

art 4: Establishing Good Credit
————————————————–

So you don’t have any credit to speak of, but you have big plans for the future.  Maybe you’re a fresh college graduate or a young person eager to buy your first new car. 

If you have never had to use credit before, first of all BRAVO!  Of course, it’s best to pay cash for the things you need so that you don’t have to worry about credit card payments, loan payments, or interest rates.

But if you’re young, the chances of you needing credit in the future are very real.  Someday you might want to buy a house.  Perhaps you’ll want to buy a new car. 
Chances are pretty good that you won’t have the cash outright to buy these high ticket items which mean you’ll need credit.  Plus, it’s always good to have a little credit since many utility companies will look at your credit to turn on your power bill, for example, without a deposit of some type.

One great way to start establishing credit is to apply for a store credit card (Sears, JC Penney, etc.).  Once you get the card, make a few small purchases and pay them off completely.  Do this a few times over the course of a year and you’ll find yourself with some established credit with an excellent payment history.  DO NOT go overboard and buy more than what you can pay for, though. 

You can also apply for a secured credit card.  These cards ask that you place a certain amount of money in your account for which you will receive a charge card.  Then you can make purchases up to the amount of money that is in your account.  Credit reporting agencies treat these cards just like regular credit cards and look to them as a responsible way for you to establish a good credit history.

You will have to have a checking account to establish credit.  This lends to your credibility with lenders and shows that you are able to manage your money effectively.

When applying for a credit card of any type, be sure to ask if they report to any of the credit reporting agencies.  As we’ve said before, they are not required to do so, and if they don’t, having one of these cards or loans won’t do you a lick of good even if you do make your payments on time.

Part 5: Repairing Your Credit Score
————————————————–

Don’t despair if you find yourself with a less than desirable credit score and credit history. You are human and can make mistakes. It’s natural. The key to this is recognize that your spending habits are out of control, your credit has been damaged, and then vow to never get yourself back in the same situation after you have gotten your credit repaired.

First, get your credit report. Get one from all three agencies. You get one free and then you’ll probably have to pay around $10 a piece for the other two. It’s important to get reports from all three agencies so that you have a full picture of your credit history.

Some companies only report to one agency. Some report to all three. But if you are committed to repairing your credit, you need all three so that you don’t miss anything.

Then go over those credit reports carefully. See the section above on how to read these credit reports. Check to see that there are no errors such as a bill you’ve paid but that is still being shown as owed.

People at credit bureaus are human too and make mistakes just like you! If you don’t call attention to these mistakes, no one else will. We’ll cover correcting those mistakes a little bit later.

The next part involves pulling out those accounts that are delinquent and making a re-payment plan. Unless you are declaring bankruptcy, you’ll still need to pay your debts and doing so can go a long way towards improving your credit history. Creditors will see that you are doing the best you can to get back on your feet and this improves your credibility.

If all the bills are too overwhelming for you to consider paying back at once, just concentrate on one at a time. Break them into pieces, contact the company and let them know you are trying to come up with a repayment plan and if there’s anything they can do to help you out.

These companies really just want their money in the long run, so they are going to be willing to help you. Once that company is paid off, move on to the next one until everyone is paid off.

Part 5: Repairing Your Credit Score
————————————————–

Don’t despair if you find yourself with a less than desirable credit score and credit history. You are human and can make mistakes. It’s natural. The key to this is recognize that your spending habits are out of control, your credit has been damaged, and then vow to never get yourself back in the same situation after you have gotten your credit repaired.

First, get your credit report. Get one from all three agencies. You get one free and then you’ll probably have to pay around $10 a piece for the other two. It’s important to get reports from all three agencies so that you have a full picture of your credit history.

Some companies only report to one agency. Some report to all three. But if you are committed to repairing your credit, you need all three so that you don’t miss anything.

Then go over those credit reports carefully. See the section above on how to read these credit reports. Check to see that there are no errors such as a bill you’ve paid but that is still being shown as owed.

People at credit bureaus are human too and make mistakes just like you! If you don’t call attention to these mistakes, no one else will. We’ll cover correcting those mistakes a little bit later.

The next part involves pulling out those accounts that are delinquent and making a re-payment plan. Unless you are declaring bankruptcy, you’ll still need to pay your debts and doing so can go a long way towards improving your credit history. Creditors will see that you are doing the best you can to get back on your feet and this improves your credibility.

If all the bills are too overwhelming for you to consider paying back at once, just concentrate on one at a time. Break them into pieces, contact the company and let them know you are trying to come up with a repayment plan and if there’s anything they can do to help you out.

These companies really just want their money in the long run, so they are going to be willing to help you. Once that company is paid off, move on to the next one until everyone is paid off.

Part 6: Identity Theft and Your Credit
————————————————–

Criminals know the way to steal your identity, and the worst part is that it’s not all that difficult. You know all those credit card applications you get in the mail? If you don’t shred them, they can use that to steal your identity.

It’s not above them to sift through garbage just to obtain a social security number or a driver’s license number. Once they have these vital bits of information, it’s easy for them to steal your identity.

What they will do is scary. They will apply for credit cards in your name and max them out within days. They will obtain loans in your name and never make a payment. Then the loan company comes after you for the money. It’s something that affects millions and millions of people each year and it can be a real mess when it comes to your credit report.

As many as 85 percent of all identity theft victims find out about the crime only when they are denied credit or employment, contacted by the police, or have to deal with collection agencies, credit cards, and bills.

A study on the aftermath of an identity theft by the nonprofit Identity Theft Resource Center found that victims spend 600 hours recovering from the crime because they must contact and work with credit cards, banks, credit bureaus, and law enforcement. The time can add up to as much as $16,000 in lost wages or income.

The number of reported cases of identity theft is increasing steadily. There is no one reason for this, but rather this is due to several ways in which our lives have changed in recent years, all of which make it easier for people to obtain our personal information.

In the United States, Social Security numbers are used more commonly as a means of identification. The Internet has made the transmission of personal information easy and, at times, less secure. Online retailers store our credit card information and contact information in databases we assume to be secure.

Marketing databases not only contain personal information, but they aggregate information on our spending habits as well as contact information. But potentially nefarious employees of these companies could have access to that information. They can then sell it online in chat rooms where criminals meet to swap information.

Part 6: Identity Theft and Your Credit
————————————————–

Criminals know the way to steal your identity, and the worst part is that it’s not all that difficult. You know all those credit card applications you get in the mail? If you don’t shred them, they can use that to steal your identity.

It’s not above them to sift through garbage just to obtain a social security number or a driver’s license number. Once they have these vital bits of information, it’s easy for them to steal your identity.

What they will do is scary. They will apply for credit cards in your name and max them out within days. They will obtain loans in your name and never make a payment. Then the loan company comes after you for the money. It’s something that affects millions and millions of people each year and it can be a real mess when it comes to your credit report.

As many as 85 percent of all identity theft victims find out about the crime only when they are denied credit or employment, contacted by the police, or have to deal with collection agencies, credit cards, and bills.

A study on the aftermath of an identity theft by the nonprofit Identity Theft Resource Center found that victims spend 600 hours recovering from the crime because they must contact and work with credit cards, banks, credit bureaus, and law enforcement. The time can add up to as much as $16,000 in lost wages or income.

The number of reported cases of identity theft is increasing steadily. There is no one reason for this, but rather this is due to several ways in which our lives have changed in recent years, all of which make it easier for people to obtain our personal information.

In the United States, Social Security numbers are used more commonly as a means of identification. The Internet has made the transmission of personal information easy and, at times, less secure. Online retailers store our credit card information and contact information in databases we assume to be secure.

Marketing databases not only contain personal information, but they aggregate information on our spending habits as well as contact information. But potentially nefarious employees of these companies could have access to that information. They can then sell it online in chat rooms where criminals meet to swap information.

Part 7: Raising Your Credit Score
————————————————–

Let’s say you want to buy a house but your credit score is somewhere around 675 instead of 720 which will get you the best rate on a home loan. If you want to raise your credit score quickly, there are some steps you can take that can guarantee a great home loan or any other credit line for that matter.

The mantra for getting a great score is pay your bills on time, keep account balances low, and take out new credit only when you need it. People who do that faithfully have very high scores. It usually means you’re being conservative and cautious about credit.
It’s not a toy and it shouldn’t be a hobby.
That’s good advice, to be sure, but these actions take a long time. What if you’re house hunting and you just need a few extra points to bump you over the line to the great rates? As we’ve said before, the first place to start is with your credit report. Check it over and find out what your credit score is right now.

You will want to concentrate mostly on correcting any errors by taking the steps we’ve outlined above. Look for errors such as accounts that aren’t yours, late payments that were actually paid on time, debts you paid off that are shown as outstanding, or old debts that shouldn’t be reported any longer. Negatives are supposed to be deleted after seven years, with the exception of bankruptcies, which can stay for as long as 10 years.

After repairing errors, the fastest route to a better score is paying down balances on credit cards. There’s really no silver bullet, but over 60 day’s time, it is possible to increase your score 20 points by paying down your credit lines.

Had a few late payments in your past? If you find yourself in some financial difficulties, you can protect your score by making sure your payments don’t go 60 days past due. Some lenders don’t report 30 days past due, but they all report 60 days past due.

Even if you’ve paid your bills late in the past, you can improve your credit score by paying every bill on time from now on. Forget about grace periods. If you want to have a really good record with the credit agencies, pay your debt before it’s due and keep your balances low.