How to re-establish credit history

Published: 09th February 2007
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We all know how it's important to have good credit history. Rebuilding credit history takes time, sometimes over 18 months, and hard work. You need to prove good solvency and get positive items on your credit report.

As a consumer you've learned the importance of establishing a good credit rating. The advantages of raising your credit rating influence your budget mediately: you'll be offered better credit card deals with lower interest rate and better rewards.

That's why the first thing you should do is to receive copies of your credit report from each of the three credit bureaus: Equifax, TransUnion, and Experian. Check it over industriously to find out what kind of information it includes. If you disclose any errors, write the credit bureau that provided this report. Even one error removed from your credit report may save you thousands dollars.

If you want to reestablish your credit history you will need credit card not only for buying purpose but also good payment record to improve your credit score. When choosing credit card you should take your needs into account.

A secured credit card is one good way to start rebuilding your credit history. Secured credit system works simply: credit card is secured by customer's deposit account. Customer has to deposit between 100% and 200% of credit. If customer doesn't pay, credit company will take it out of his or her deposit. But it isn't the only option.

You can search through credit cards for bad credit. By all odds damaged credit history will cut your selection of credit cards. But several credit companies feel sympathy for people with poor credit. They provide higher interest rate, fewer features and lower spending limit indeed. You should take into account that if you have credit score about 350, credit company hardly gives you credit limit higher then $300. But all your fees (about $150) would be stricken off your credit limit.

As a result, your factual credit limit would be $150. Therefore, it would be much better to get secured credit card to avoid paying so high fees. When you try to rebuild credit history the most vital moment is to pay bills on time. It concerns not only you credit card bills, you should pay on time all your bills including telephone bill, rent etc. Negative information, such as late payments, judgments against you has a bad influence on your credit score. Late payments subdivide into hard late (more then 60 days) and soft late (about 30 days). Studiously avoid hard late payments. They have deep bad influence on your credit worthiness.

Establishing good credit habits and therefore a good credit reputation will improve your credit worthiness. The good habit is to pay off balance in full each month. This will be reflected in potential lenders offering you lower interest rates and better deals. The main factor in your FICO is how much money you owe on your credit cards. It's important to keep your credit balance about 30% of your credit limit. Strongly apply for credit card that suits to your credit history. If you don't qualify for any credit cards, you can get a secured credit card from your local bank.

If your credit application is denied, follow these tips:

1. Ask the bank or credit company to provide a written explanation why you were turned down.

2. Check with the credit bureau the adverse information to see if it is accurate.

3. Don't apply for credit card until the reason for the denial has been determined.


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