Wednesday, December 25, 2013

Rebuilding Credit After A Credit Card Disaster

If you haven’t been paying on time for the past years, or you’re just paying the minimum or not making the full payment – chances are, your credit score is not in tip top shape. If because of payment delinquencies, you were forced to seek the help of a debt relief company – either a credit counseling agency or debt relief company, before your scores get better, they would have undergone the worst first.

What is credit counseling’s effect on credit?

Credit counseling has a program called Debt Management Plan which runs for three to five years. While you are in the program, your credit report would reflect it, but once you’re done – the note should be gone too.

What is debt settlement’s effect on credit?

Debt settlement stays on the credit report for seven years and there’s no legal way to remove it. The whole seven years must be served before it disappears. Bankruptcy Chapter 13 has the same effect, only it also appears on public records for twenty years, while debt settlement doesn't.

Rebuilding Credit After A Credit Card Disaster

Recovering from a credit card debt disaster depends on which route you took in debt elimination. The worst route would be bankruptcy, as it might take you about two years to recover from it. Generally, the first step to credit repair, whatever financial disaster you've gone through would be to obtain a copy of the credit report and check if your payments are being reported in a timely manner - and also to see if there are any discrepancies in reported information. All these measures are to ensure that your credit report would look attractive to future creditors or lenders. If you just got out of a debt relief program, your credit score would sure be poor, and so expect to be offered cards with very low credit limits, really high interest rates you may end up being rejected.

The second step would be to get a secured card. In it, the amount deposited is the credit line. For example, you deposited $500, your credit line then is also $500. Secured credit cards encourage consumers to increase their deposit to extend their credit line.

In between obtaining secured and secured cards, you can get a store card or a gas card, because they are not hard to acquire. The only catch is it requires you to use them monthly and pay for them as often as you can. You can pay the full or partial amount. If full payment is not possible, then at least try to pay an amount that’s above the minimum. Also, try not to use up more than 50% of the credit line on the same purchase. Have a little patience and continue to prove that you've gained some credit responsibility and soon enough, you’d get your higher credit applications approved.


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