The Future – You Can Establish New Credit

The good news is you can always “fix or improve your credit score” by turning over a new leaf. Time is on your side and if you can demonstrate that regardless of your past issues you are now on the straight and narrow path to good credit, it counts.

Once you review and remove any negatives from your credit report that you can, the next step is to establish some new credit with positive entries. This may take a little time but can absolutely increase your credit score dramatically.

New credit accounts that show timely payments will have a huge positive impact on your credit score. With 3-5 new positive entries on your credit report, you can raise your credit score up to 40-50 points.

And once your credit score is raised you can then go back and refinance any active credit based on this new credit score. Which means you can save a bunch of money by getting a much lower interest rate as demonstrated in the Quick Fixes section.

Regardless of what has occurred in the past, if you demonstrate that you can pay your bills on time and adhere to any new credit transactions now it will help. The trick is finding some vendors who will grant you some credit, and report back to the credit bureaus.

There are three good sources to help you revive your credit score with some good entries. You want to go to a creditor that reports to the Credit Bureaus on a regular basis. Large appliance dealers (a good example here in Texas is Conns – www.conns.com ), your local bank of choice, and any of the national credit card companies.

Keep it low key, the purchase staying under what you know you can pay off early. Say you need a new refrigerator anyway so you go to the appliance store and pay down half, and finance the balance over 12 months. You want the contract to go at least 6 months and then pay it off.

Go to your local bank and get a small loan for something that has collateral, like a lawnmower or something in the $500 range. If you’re in really bad shape, offer to put the $500 in a savings account to guarantee the loan. Once again pay on the note for 6 months and then pay off the remainder.

Find a credit card company that will issue you a small amount credit card. The Bankrate web site is a good place to start (http://www.bankrate.com/brm/rate/cc_home.asp ). The interest rate really doesn’t matter since you are going to charge a very minimal amount each month and pay it off early each month. As long as you pay early they will slowly raise your credit limit and report good payment record. Make sure you always pay early.

Start a savings account at your local bank or join a Credit Union. That’s a good idea anyway even if you can only put in $10-20 a week or month most lenders consider it a positive.

So in 6-9 months you will have three good account listings with the Credit Bureaus. You can continue to find small purchases to finance with different creditors in the next 6-9 months and do the same routine.

In that same time period the older negatives will roll off or at least diminish in value in considering you for new credit. We call it drawing a line in the sand and it’s been very effective for building good credit.

The key elements is to let the short term financing credit accounts to go for at least 6 months (paying early) and then pay it off. Same with the credit card account, pay it off early each month. This improves the amount of available credit that is not used.