We live in a consumer society where it seems like more
attention is paid to your credit record than to your criminal
background. Credit has been elevated to a position where it
permeates every factor of a person's life and has even crossed
over into the realm of being a moral question. Have you ever
been made to feel guilty or embarrassed because you can't get a
loan? What about having your credit card rejected at a
restaurant or department store? It's not just that you don't
have money readily available, it's that you suddenly become a
pariah in the eyes of some cashier. And, of course, to everyone
that is standing around within hearing distance.
Nearly everyone has been in one of these situations one time or
another. And, it begins to weigh heavily on your psyche. Don't
despair! Having bad credit does not mean you are a disreputable
person AND there are very few credit situations that are beyond
repair. You just have to know what steps to take and what order
to take them in. If you are careful, payday loans can be an
excellent means of reestablishing your credit.
There are several ways you can go about clearing up your credit
situation.
Payday Loans
A payday loan may be able to help you re-establish your credit.
The way it works is like this. Get the best loan deal available,
with the least fees. Make it small, say for $100. If you can
find a lender who only charges $10 per hundred, you will owe
$110 on your next payday. Even if you have to pay a $25 charge
for the $100 borrowed, the total payment is still only $125.
Pay it off on the due date, in full. Do not be tempted to roll
the loan over because it will just cost additional fees. Don't
borrow unless you know you will be able to pay back the full
amount on the date due and do not borrow from multiple lenders.
Repeat this process several times to build a good reputation
with the company. Payday transactions are ones that may or may
not be reported to credit agencies, but you can generally add
good reports to your own credit profile. It may cost $2-$3 per
lender and you must ask the lender before proceeding.
Credit Cards
According to the Credit Repair Institute, a Visa or MasterCard
are the best credit references you can establish.
At first glance, this may not seem like a great solution
because you are thinking that you probably can't possibly get a
credit card. However, there are banks and other lenders out
there who will issue limited value credit cards to people with
bad credit, on a couple of conditions. First, you will probably
have to pay a fee to get the card in the first place. Then, it
will probably be limited to a small amount, say $200. Pay the
fee, get the card (making sure that it doesn't charge huge
interest) and use it very, very wisely. In other words, go make
a small purchase on the card instead of paying cash for
something that you already intend to buy and have money for.
Then, use the cash you already had set aside to pay the credit
bill, before the due date, so there are no additional interest
fees. Repeat the same process several times, over several
months. Always make sure you are not buying something extra
that you may not have money to pay for, just use the card to
establish good credit.
Other banks issue secured credit cards for which you deposit a
particular amount, for example $200. Make the deposit, get the
card, and then make several small charges on it - again ones
that you know for certain you can pay back in full before the
due date so that you don't accrue any extra interest fees. Shop
around for the card and make sure you get the best deal
available in terms of annual fees, annual percentage rates,
grace periods and any surcharges that may be attached. Secured
cards are nearly as good a means of bolstering credit as
unsecured ones.
Get a Loan
That sounds like crazy advice, but if handled the right way, it
can quickly rebuild your credit. According to the Credit Repair
Institute, this is a fast and reliable method, and can be done
with as little as $400. It involves opening a savings account
at a local bank with about $400. After the account is
established, ask the bank for a loan and tell them you want to
secure it with the savings account. They are likely to grant
you at least 70% of the money you have in savings and, in some
cases, up to 100%.
Take the money from the loan and deposit in a savings account
at a second bank, get a loan against that and deposit that in a
third bank. The money borrowed from the last bank can help pay
the first few payments on the others. Make certain that you
make payments on time and as agreed. Also make certain that the
banks report your payment history to the three major credit
bureaus, monthly.
According to the Credit Repair Institute, this is the quickest
way to rebuild credit quickly. In the meantime you will be
paying for it by paying interest, but the good news is that the
interest earned on the funds deposited in savings will partially
offset the interest payments you will be making back to the
bank.
For more free-reprint articles by Max Hunter please visit:
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