Rebuilding Your Credit

Many people today are facing circumstances they never imagined would happen in their life. So many circumstances have occurred in the last few years that no person could have anticipated or been able to get through without damage to their credit.

Once you're re-established you have to fight the up-hill battle of rebuilding your credit. Here a few thoughts and ideas on what to do.

To qualify for a Mortgage, you'll need about a two-year, on-time payment history on 3-4 "tradelines". That simply means your credit report will need to show at least 3 or 4 active accounts with about two years of good payment history.
This is the age-old question of how do I get credit when no one will lend to me because of what happened to me recently. If you can get a higher source of credit like an auto loan or something from a national bank, that's great. But most people won't have that luxury.
This forces most people to swallow their pride and obtain some secured credit cards. These are accounts where you give the credit card issuer a deposit of $250 or whatever amount, and then they issue a card with an equal credit limit.
NEVER allow the balance to go higher than about 40% of the limit, and always pay the card n time. Even if you have a disagreement with them or a charge on your account, make the payment and work it out. Remember, you are re-establishing your credit and anything negative can set you back another couple of years.
If you have charge-offs or collections, settle them. Most companies are happy to take 50% of what is owed. Make sure you have them put in writing that they will report the account to all three credit repositories within 30 days of receiving your payment, and that it will stay "paid in full". They may insist on saying "settled for less than amount due". If they insist, it still accomplishes what you need. You will need to pay them in certified funds and send it with a cover letter via certified mail, return receipt requested.
If you don't settle or Discharge the debt through a Bankruptcy, this will follow you for 7-10 years or longer. These companies keep selling the debt to other collections companies who will claim it's a new debt and will report it as often as every month. That will continue to drive down your scores, so you have to get the items off your credit report, one way or another.
One of the other things you can do that might improve your credit scores slightly is to go to www.optoutprescreen.com and opt-out of unsolicited Firm (pre approved or pre screened) offers of credit. When an unsolicited inquiry to your credit occurs, it can cause your credit score to drop.
You can also go to www.myfico.com and sign up for the daily monitoring of your credit scores. With the ever-tightening requirements for minimum credit scores (640 at the time of this writing- 01/2011), many people are just a few points away from the minimum. The difference between gaining loan approval or not may be literally 1-day. The daily monitoring will let you know when your scores have improved to the minimum required score.
You may also benefit from consulting a professional debt management organization. There are many of them from which to choose. We have just begun working with a company called Continental Credit LLC. This is a new relationship and we hope it turns out well for our customers. You can contact Eddie Anicka at (303) 868-0748 (yes, that is area code 303; not 330) and let him know you are working with Jim Cook at the Home Lending Source in Middleburg Heights, OH.

If you follow these general guidelines, you will put yourself in a position to qualify for a Mortgage at the earliest time possible. These certainly aren't the only way to get your credit rating back on track, but it will accomplish the main goal; that is to continually improve your credit scores.

If you have more questions, or this is not completely clear, call me.