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Rebuilding Credit: Which Loans Actually Help You Rebuild?

rebuilding-creditIn today’s society, so much rests on your credit. The ability to purchase a home (using mortgage financing), a car, rent an apartment – even some jobs will require a credit report. Having bruised credit can make life difficult, especially if you are an undischarged bankrupt or in a consumer proposal. This is why rebuilding credit is so important.

Rebuilding credit means showing responsibility and making all of your payments on time. This means borrowing from lenders who actually rebuild your credit. If your credit has taken a major hit, such as in the case of a bankruptcy, you should work on rebuilding as soon as possible. Just be sure you go about it the right way.

For example, many think payday loans are a quick fix – they are easy to get and no credit check is done, so that will work. Actually, it won’t. Payday loans do not report to your credit so they are of no value that way. They are also the worst possible credit product because of their rapid repayment terms and sky-high fees. Stay far, far away.

What about renting furniture or the like? These types of endeavours also don’t report to your credit so they are of no value when it comes to rebuilding. You may get a nice new couch, but you’ll still be sitting not-so-pretty with bad credit.

Secured credit cards are a good way to be rebuild, but it depends on how you manage them. Firstly, usually with secured cards the balance is very low and will take some time to have an overall positive impact. Additionally, with limits quite low, it can be easy to use up to that limit and then make minimum payments thinking it will rebuild positive credit. However, if you are using to your limit, which often happens with small limit cards, it will negatively impact your credit even if you make your payments on time. You need to stay well below that limit (think no more than 50%).

The best thing to do is couple your secured card with a term loan. Term loans are not revolving credit so you can’t technically “max” one out, thereby leaving negative impacts to your credit. Because payments are pre-fixed over a term, you prove that you can manage a fixed payment over time. If you plan to buy a house, the more you borrow, the better off you’ll be because you are demonstrating more financial responsibility.

Just remember: be careful not to apply for credit all over the place – this will result in too many inquiries and make you look like a credit seeker. Be wary of insurance, opening new bank accounts, phone services, store cards, gym memberships, etc. – all can result in inquiries to your credit.

If you want to start rebuilding your credit the right way, call Prudent Financial today. We can help: 1-888-852-7647.

 

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