How to Reestablish Credit After a Debt Management Program?

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Re-establishing credit after a debt management program is very important. Find out how to re-establish credit after a debt management program with help from a real estate and mortgage professional in this free video clip.

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Video Transcript

Hello, this is Sidney Potter from Potter Equities in Pasadena, California. Thank you for your time. I appreciate it. I've been asked to talk about credit and more particularly how to re-establish credit after a debit management program. Just to give you a bit of history on debt management programs sometimes they're known as DMPs. They originated about 1951 in the United States and they reached their high mark in the late 60s. There are approximately a thousand debt management plan programs in the country. They're sometimes known as consumer credit counseling and in fact, if you've ever come out of a debt management program and I'm here to give you a few pointers on how to re-establish credit, you've probably looked at your credit report and noticed it said CCC or just in case you are curious that's for Consumer Credit Counseling. That's what the CCC stands for. Well what is DMP, Debit Management Programs? Well, this is what they are. They give you the opportunity to re-establish credit. Now the problem becomes what do you do after you've come out of the back end of a DMP? I've got a couple of suggestions actually, a half a dozen. I'm going to go real quick so please take notes. First and foremost, rebuild your savings. You're coming out of a DMP, you want to be quick out of the gate and you want to start saving those savings. That means any surplus that you can acquire, certainly acquire in terms of monetary buildup and put that in a banking account or a checking account that's going to be absolutely important. I would even recommend on your paycheck to get an auto deduct program so you're taking out $10, $50, $200 per week, bi-monthly, depending on how you get paid in order to blossom up to a decent savings account. Item number two, rebuild your credit. We just talked about rebuilding your savings, rebuild your credit. You're probably in a situation where you're going to have an incredible amount of credit cards coming your way through the mail and a lot of fliers, you're considered a good catch. Why? Because you've got a clean deck. You don't have a previous negative history that's chasing you from behind because you've cleaned it up at this point. So when you do get those credit cards be very selective on what you go with. And quite frankly if you don't like the banks, you think their interest rates are too egregious, go with a credit card from a service provider, let's say an auto service provider, a department store or perhaps a Petro card or rather a fuel card in order to rebuild your credit. Thirdly, make certain you have a steady job. There's nothing more important than having set employment, even if it's part time employment. Fourthly, pay everything on time. You're talking about credit consciousness, everything on time, even get an auto deduct from your checking account because you can certainly do those and that way you don't have to worry about missing let's say a payment on one of your credit cards. So that way you've got a perfect payment history and you're considered a good risk when you go about acquiring credit let's say for a vehicle or for a home. Fifthly, be conscientious of revolving debt. Revolving debit in a certain ratio that exists on your credit report is critically important. Let's say for example, very quickly, you have a $500 credit card. You'd want to keep about 30 percent debt ratio. That would be approximately $150 to $200 outstanding balance. Try not to max that card out. Consumer credit companies are liable to consider that irresponsible financial management. So keep that very conservative out of 30 percent and lastly, number sixthly and this happened to me not too long ago, but don't take temporary credit card increases. Let's say for example, you've got $1,000 and you're buying an item there that takes it to $1,100, the clerk at the department store gets on with the credit card company, their operation center. They're willing to go $1,100 but you've got a maximum of $1,000, don't take that increase unless it's a permanent increase. The reason why, because it may be interpreted as your responsible financing on your part because you've exceeded your credit limit and what will happen when you look at the credit report, it's going to show that you exceeded the $1,000 mark. Now if it's a permanent adjustment to $1,100, go with it but if not I'd probably run for the hills. So there you go, half a dozen tips on how to re-establish your credit after a debt management program. This is Sidney Potter, speaking to you from Pasadena, California with Potter Equities. Thanks for your time. I'll see you at the finish line.


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