Monday, September 17, 2012

How I rebuilt my credit with a secured credit card

Utilizing a secured credit card can be a great way of rebuilding your credit history. How can I be sure of this? It's the method I used to repair my credit. Since no one would extend credit to me, getting a secured credit card was the only way I could establish my credit again. This is how it worked for me.

I sent $500 to the credit company and they sent me a credit card with a $500 credit limit. The $500 security deposit I made to them was held in a savings account. Every other aspect of the credit card functioned the same as an unsecured credit card. Like any other credit card paying on time is very important.

After 6 months of timely payments, the credit card company offered to triple my credit limit if I made another deposit. I sent them an additional $500 deposit and they added another $1,500 to my credit limit. I now had a credit limit of $2,000. After 1 year of timely payments, they sent back the $1,000 deposit plus interest and the credit card was converted to an unsecured card.

I wasn't on easy street yet because the interest rate on the card was horrific. It would take more time before other credit card companies with better interest rates would be willing to extend credit to me. Until then, I had no other choice but to suffer the high interest rates but here's something that I learned along the way.

Although I had to wait 7 years for the bad credit card to fall off my credit report, as I was establishing positive credit history, it only took a few years of responsible credit usage before I was able to get an American Express Charge Card. Granted my FICO score was not impressive yet, with each monthly billing cycle I was able to get my credit out of the gutter. As long as I kept everything current, it was just a waiting game for my FICO score to rise.

There are no quick fixes at repairing your credit. The key to this is consistent timely payments.

Monday, September 10, 2012

A lesson from Jane

While I was working at Lehman Brothers, there was an older white woman named Jane Edelman. I never dared to ask how old she was, but I'm sure she could have qualified for Social Security. When Jane's husband passed, she decided to go back to work. She wanted to show her children, that she was not going to just sit down and die. She was still an active player in this thing called life.

Jane somehow overheard me talking about trying to fix my credit. She pulled me to the side and gave me this advice. She told me to get a private loan from a bank. She didn't care if it was $1,000 or only $500. Neither did she care which bank I got the loan from. She told me that once I got the money, put the entire amount into a savings account. When the payments were due, I should pay the bank back their own money. The interest would have to come out of my pocket, but that was the price I had to pay to get positive credit history.

When you are looking for information, do not discriminate who gives it to you. I'm not saying to just take advice from anyone. But don't write off people that you might not have initially thought of. Keep your mind open. You are not looking for a best friend; you are looking to learn from anyone friend or foe! Lessons are everywhere.


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