Credit Building

Secured Credit Cards

Rebuilding & Establishing new credit is a vital part of our credit restoration process.  One of the best ways to do this is via a Secured Credit Card.  

A secured credit card looks and acts as a regular credit card except... you'll be required to put down a security deposit (ranging from $300 - $2000).  This security deposit amount is equal to your credit limit; it acts as a 'security' in the event you are not able to make your payments. Therefore, the amount of your security deposit will always remain the same; while the credit you have been extended on your secured credit card will fluctuate based on usage. 

This is not a debit card; you are still being issued credit from a bank.  Further; your spending activity is NOT reported to the credit bureaus with a debit card.  Your spending activity IS reported to the credit bureaus with a secured credit card.  Thus, your score can increase with positive payment history and usage; and can decrease with poor payment history and poor usage.

Best Practices for Success In Building Your Credit:

~ Pay On Time!  Better yet; pay off every month in full; it increases your score faster

~ Only use between 5-30% of your approved amount.  For example if you have put down $300; you only want to spend $15-$90  per month.  KEEPING BALANCES LOW IS VERY IMPORTANT.  Pay off before or on the due date. Before is best, however at the very least pay on time - no exceptions!  

~ Increase your security deposit if you can; this will increase your credit limit.  This does not mean you need to increase your spending!  Keeping balances low is very important; increasing your credit limit is just as important because it positively affects your utilization rate; which makes up 30% of your credit score. 

~ Try to select cards that give you the option of turning it into a Unsecured Credit Card after a certain amount of on-time payments.  Let's face it; interest rates are high on secured credit cards; being able to switch over to an unsecured card as soon as possible will save you a lot of money over time in interest fees.

Personal Loans

There are two types of credit, Revolving (credit cards) and Installment (loans). We've discussed how secured credit cards, when used properly, can positively impact your credit score; now let's discuss the positive affects personal loans can have on your credit.

Personal loans can be unsecured (meaning no deposit required) or secured (a deposit required).  It is best to obtain a personal loan when you already have at least one (1) credit card reporting on your credit report.  10% of your credit score is based on having a positive mixture of different types of credit.  

The best place to search for a good personal loan is a credit union.  They offer a great product called Credit Builder Loans that require you to be a member and to open an account equal to the amount you'd like your loan to be; similar to a how a secured credit card works. The amount you deposit with them is placed in an interest bearing account where it is held until you complete the terms of agreement for the loan.  

The actual loan itself is small, between $500-$1000, and once it has been paid off, the deposit and all of the interest it has accrued is refunded back to you.  It is reported to the credit bureaus and is a great way to build credit. One of the things I love about personal loans are the fixed payments; totally easy on the budget :).

My advise on using it:  DO NOT SPEND THE LOAN MONEY.  Keep it in an account where it's job is to build up your credit history and credit score.  You'll have to add a little extra to account for the interest it will accrue but try to pay it down to 35% as soon as possible.  Installment accounts that have been paid down to 35% of the total amount borrowed count more positively into your credit score.  Pay off in full no later than 12 months and not the 2 year pay off term that they give you; the temptation to spend the loan money set aside tends to be too high for most, so avoid that temptation by paying it off within a year.  

Two additional options for a personal loan that my clients love are Prosper (requires a 640 credit score) and Springleaf (watch their interest rates).
These do not require a deposit but are great tools to build your credit using the Personal Loan option.  They are also great options when used as a debt pay off method.  Example:  If you have credit card debt with high interest rates, using a personal loan with a lower monthly payment AND a lower interest rate makes more sense financially in the long run.  

Authorized User Trade Lines

Rebuilding your credit can take some time; for some it can take years. However, there is a method that can help our clients build their credit faster.  It's called authorized user trade lines.  By using seasoned, healthy trade lines you can build your credit quickly and successfully, thereby achieving your financial goals faster.  Each tradeline can add up to 35 points to your credit score.

Here's how it works: Our trade line experts will analyze your credit report and recommend services to achieve your credit score goals.  Upon completion, you will be presented with our recommendations as well as a list of available services to select from.  

Please keep in mind; authorized user trade lines are a tool; and it does not have the same results for everyone.  If you have had recent negative information on your credit report such as new late payments, new bankruptcy, new collections, or new judgments; you will not see a significant increase in your credit score.

If you'd like to inquire about our Authorized User Trade line program; please fill out the 'Contact Me' form and type "Authorized User" in the message area; or give us a call!

Budgeting & Debt Reduction

Budgeting and debt reduction go hand in hand when it comes to rebuilding your credit. If you find that you have more month than money, or are living paycheck to Monday; chances are your credit cards and/or bank accounts are feeling the pinch as well.  These practices prevent you from saving for your dreams - whether it be a home, retirement, kid's college tuition, or a dream vacation. By managing the money you bring home on a monthly basis, you can take control of your finances, your credit and your future.  

Our goal is to ensure your debts are current and remain current.  How you pay your current debt obligations amount to 35% of your credit score! The entire credit repair and credit building process will fail if you are incapable of making on-time, regular payments on your current debts. 

Reducing your current debts is another credit building tool; this typically applies to revolving credit, namely credit cards.  FICO scoring model recognizes credit card usage in 20% increments.  So, if your credit card is over the 50% mark you'll get the biggest increase in your credit score by paying it down to below the 20% mark as soon as possible (or at the very least the 30% mark).  We strongly encourage the reduction of your credit card balances in order to see as large of a boost in your credit rating as possible.  

Free Debt Management Tools:

Debt Management Calculator - Explains different methods of managing debt via the 'snowball' or 'avalanche' method; or a combination of both.

Yearly Budget Calculator - designed to help you create and manage your budget on a monthly basis, all within a single worksheet. It allows you to (1) easily add or remove budget categories, (2) plan for irregular expenses, (3) plan based on a variable income, and (4) make future predictions to aid in decision making.

Richest Man In Babylon - One of my favorite books on finances, an excellent read filled with easy to understand financial advise. Written in parable form, the simple principles by George Clason can forever change the way you look at your money forever! CLICK HERE FOR FREE EBOOK

Dave Ramsey's Guide To BudgetingGreat guide on Dave's award winning 7-Baby Steps to Budgeting CLICK HERE FOR FREE ONLINE GUIDE (PDF)

Bill Cutterz - This company will help with negotiating the lowering of your rates on your bills with your service providers! You split the savings difference with them (50/50)

If you need assistance rebuilding your credit; simply complete the 'Contact Me' form on our page and type "Credit Building" in the message area; or feel free to give us a call!

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