Question for the Money Doctors
Question submitted on Jan 30, 2012.
QuestionWanting to rebuild my credit.Is getting a credit card from my credit union, secured by my savings,a good idea? will it help me obtain a future auto loan?I get mixed opinions. Are all businesses required to report to credit agencies. It was suggested that I should go to RENT TO OWN or Aarons make a
purchase on an item priced $500 or more. Make certain that payments are never late and always pay total amt due and have it paid off in 12 months. Thus demonstrating a good payment pattern history and ability to pay off debt in a timely matter. I also have heard that this method does not work to rebuild credit because the payment history was never reported to the credit agencies by the merchant. What is your opinion?
First, you should get copies of your credit reports and verify that the information carried by the three reporting credit agencies is accurate. If not, inform the agency and if they can't obtain verification on the item, it will be removed.
You can also add a statement to your report through the agencies' websites explaining any extenuating circumstances that caused your situation, for example, medical bills or loss of employment. It won't affect your FICO score, but may be considered by the reader.
Obtaining a secured credit card is a good way to work towards rebuildiing your credit. Use the card regularly, but never go over the credit limit, and make sure that your payments are always timely. The most recent credit history carries more weight than older items.
As far as retail credit, be very careful because, in addition to prices that are generally higher than market, the interest charges and fees can be exceedingly high.
Make it a practice to pay all your bills currently, including utilities, rent, etc. Vendors may not report good payment history, but they are likely to report late payments.
You should also contact your credit union because many offer free credit counseling services. They would be able to review your specific situation and make personalized recommendations for rebuilding your credit.
For additional information visit http://www.360financialliteracy.org/