How to Establish Credit After a Debt Settlement
Establishing good credit after completing a debt management plan takes time and patience. But your recent status under debt management doesn't have to be a strike against you.
You have an advantage---after all, you could have filed for bankruptcy and endured a much longer period before having access to credit at reasonable rates. Those fresh from a debt management plan may have limited access to credit, but they still have access.
With a well-established plan in place to keep you on track,
you soon will be on your way to establishing excellent credit.
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Things You'll Need
- Savings account
- Secured credit card and/or a gas or store card
- Savings goals
Instructions
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Build up your credit, bit by bit
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1
Establish a savings plan and build up a good cushion of general savings in addition to college or retirement accounts before applying for credit. Determine how much money you can save per month and, preferably, save until you have accumulated at least three months' worth of expenses.
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2
Apply for a gas or store credit card first, as these types of cards typically are easier to obtain. As always, apply in moderation; start with one or two cards at the most and charge only as much of a balance as you can afford to pay off in full each month.
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3
Apply for a secured credit card. These cards act as debit cards, because the funds are deducted from a preset amount you deposit. A secured credit card can help you to re-establish your creditworthiness after completing a debt consolidation plan.
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4
Research credit-building cards offered by various credit card companies. Some banks will offer cards with low balance and market them as credit rebuilding cards or cards for those just starting out with credit. These cards will bring you even closer to accessing larger amounts of credit at good rates, especially if you pay off balances in full every month.
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Tips & Warnings
Getting in the habit of paying off balances in full every month will prime you for taking advantage of perks offered on various credit cards---from cash back to frequent flier miles---without having to pay extra interest. Research credit borrowing guidelines at various credit card companies. Some are more lenient to potential customers who have recently completed debt consolidation plans, because these customers tare making an effort to take responsibility for paying off debt.
Gas and store cards can carry hefty interest rates of up to 30 percent, so proceed with caution, and NEVER keep a balance on these cards to avoid needlessly paying more in interest.
