Repair My Finances.com

Any credit repair consists of two phases: removing the negative listings from your credit report and adding new, positive listings.

Since just a couple of negative listings will earn a rejection from most creditors, repair of your negative credit should be the first priority. After bankruptcy, for example, the credit report will show many negative listings including the bankruptcy filing, discharge and numerous “included in bankruptcy” listings. While removing a bankruptcy from your credit report is no easy proposition, it is possible and definitely worth the effort.

It is important to note that you may be able to obtain much of the credit you need even without repairing your credit report.

Most home loan guidelines (including FHA guidelines) require that you have no negative credit appearing within the last two years. This means that you may have no late pays within the last two years and that any collection, lien or judgment has been paid more than two years ago. Even if you have some bad credit in the last two years, you can often find a mortgage amongst the “sub-prime” or “sub-A” lenders that will finance you even before you repair your credit. These loans will charge a higher interest rate and require more equity or a larger down payment before they will close. If you have good income and a reasonable debt to income ratio, a sub-prime loan may be the key to refinancing or getting a home while you repair your credit. In any case, if you are working on your credit repair, you may be able to refinance within a year at better terms.

Automotive financing will typically allow some negative credit before credit repair, but with less than optimal terms. If you have a few late pays, you may pay a little more in interest (but it adds up fast, to be sure.) If you have truly awful credit, you may still get an auto loan, but at very high rates (but you should definately repair your credit in the meantime.)

Standard rate credit cards seem to be the most difficult when it comes to credit that still needs credit repair. Most standard rate cards will reject you immediately for any negative credit whatsoever. Yet, there are many credit cards that work with bad credit and help you to repair your credit. Some require deposits and others require a significant annual fee. Most have low credit limits.

So, once your credit repair is underway, you can turn attention to adding positive credit. You may have to accept some of these less-than-standard credit options while you repair your credit. But, a word to the wise, there are many credit repair scams out there that prey upon the credit distressed. Even your local auto dealership may take advantage of your vulnerable position and your desire to repair your credit. Many phony credit card offers exist that allow you a card, but one that is only good for the company’s limited line of merchandise. Mortgage brokers often hide exorbitant fees in loans to borrowers who need credit repair. It is not uncommon to charge credit repair customers four to eight “points” on a sub-prime mortgage loan. These points amount to tens of thousands of dollars that you must pay over the life of the loan. Make sure that you read the fine print and compare your mortgage, auto loan or credit card to the typical terms of regular financing if you are applying before your credit repair is complete.

With that said, there are many good options for repairing and rebuilding credit that you can find on the internet or at your local credit union.

Maybe you’ve recently finished repairing your credit or maybe you’re young and haven’t used credit yet. In either case, here are a few tricks to credit repair and building a positive credit history quickly and cheaply. Most times you start building some good credit in just a couple of weeks. But, beware, if you stack too many open accounts, or too many credit inquiries, you will be denied based on debt to income ratio and excessive credit inquiries.

If you know someone (like a good friend or parent) who has good credit, you can “borrow” their good credit listings and begin to repair your credit. This friend must have credit cards, and must trust you enough to allow you to become an “authorized user” on his or her credit cards. Just have your friend call the credit card company and request that you be placed on his card as an authorized user. A copy of the card will be sent and you may simply return it to your friend. Your credit file should soon show an open account with all of the positive history that your friend has created over the years with that credit card. A small footnote will sometimes show that you are an authorized user of that card. Remember, though, when a new credit grantor goes to review your file, he may insist that the balance on the card appear on your debt to income ratio. That shouldn’t disqualify you for credit if your income is sufficient and you don’t have an excess of debt on your file.

There are a number of good secured and unsecured credit cards that advertise on the internet. These cards are designed to help you to repair your credit. Understand, however, that secured credit cards will appear on your credit report as “secured” and will not necessarily repair your credit history as much as an unsecured card.

There are a number of creditors who are traditionally more accepting of those with little credit history or who are in credit repair. For example, many college credit unions will extend low limit credit cards to students without a credit history. Many department stores, such as Sears, will extend a credit line to encourage you to shop at that store, even if your credit repair isn’t yet complete. Electronics stores, furniture stores and cosmetics shops are all usually open to extending credit to credit repair candidates.

As with any line of credit, you must make sure that you handle these new accounts responsibly. It is a temptation to use a department store credit card frivolously. Just remember that you have to pay back every dime, with interest.