How to Build Excellent Credit After Delinquency
Deciding to fix your credit after months or years of deliquency is an excellent investment in your future. Credit card companies, car dealerships, mortgage companies, landlords and even potential employers check credit, and having a good financial standing adds to your financial and personal integrity. It can take several years to build your credit after delinquency, but it can be done.
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Things You'll Need
- Copy of your personal credit report from all three major bureaus
- Phone
- Computer with Internet connection
Instructions
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Rebuilding Good Credit After Bad Credit
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Repay your creditors what you owe them, or work out a payment agreement. Call your creditors and ask for their assistance. Tell them you'd like to clear up the debt you have. More than likely, they will offer you a settlement of some kind, depending on how delinquent your account is with them.
Most creditors will work with you to help you repay your debt; anything you can afford to pay them is better than nothing. Making a conscious effort to pay off bad debt reflects favorably on your credit report and score.
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2
Consider credit counseling.There are many companies that offer free or affordable credit counseling. These companies work with your creditors and allow you to make one affordable monthly payment.
(Some programs require that you have a minimum amount of unsecured debt to proceed into credit counseling. This varies by agency, but is usually about $10,000.)
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3
Build a savings account. Setting aside funds for use only in emergencies can help you control your reliance on credit cards. Shop around for a high-yield savings account with a local bank. Even if you can afford to deposit only a few dollars each week, that money will grow into a substantial amount of money sooner than you think.
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Apply for a secured credit card. Secured credit cards are revolving credit cards that work like traditional cards, but a security deposit equal to the credit line is required upon opening the account. This security deposit is used to pay back any balance owed if you should stop making payments. In some cases, the security deposit might be returned after several years of on-time payments and responsible use of the card. For best results, charge only small amounts and pay off the balance each month.
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5
Fix any errors that appear on your credit report. Inspect your credit report from each of the three major bureaus: Trans-Union, Experian and Equifax. Dispute any errors by using their online dispute forms, calling them directly or mailing in a dispute report. Be sure to note all pertinent information regarding the disputed items.
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Tips & Warnings
Use an online calendar or money-management software to remind you to pay bills on time. Don't purchase items on credit when you don't have cash on hand. Over time, this can lead to a negative credit history if you cannot pay the credit card bills on time.
Be wary of credit cards tailored to those with bad credit. They are often laden with fees and charges that can meet or come close to meeting the entire credit line before you've even used the card. Always read the "fine print" carefully before signing up for a card.
