Your credit can be ruined by a financial crisis like foreclosure, bankruptcy, or some other event. With enough time, patience, and discipline, you can have your credit back up and working for you.
- If you've been through a personal financial crisis, like foreclosure, bankruptcy, or another event that ruined your credit, rest assured that all is not lost. You can still get credit. Having bad credit may tempt you to swear off all credit cards. But if you want to improve your credit, you must eventually use credit.
One option is to get a secured credit card, which requires you to put down a deposit that can be used as collateral. Secured cards usually charge an annual fee and may have a relatively high interest rate. However, they're an effective way to build credit. After about two years of using a secured card in good standing, you can try applying for a card with better terms.
You might be tempted to try pre-paid credit cards. While they can be useful at times, they don't report to credit bureaus. So your efforts at building up your credit with these cards will come to nil.
If you have bad credit, you can usually get a credit card if someone with good credit co-signs the application, meaning they agree to pay the debt and have their credit report take a hit if you default. Credit cards offered by gas companies and retail stores are a little easier to get than regular cards. But their credit limits and interest rates aren't as favorable. However, you can use them to charge small amounts and pay them off regularly, thus building credit.
When applying for new credit cards, too many applications can lower your credit score. Apply for only a few instead. Similarly, if you have more cards than you need, consider closing some of them. It's a catch-22 that will reduce your total available credit limit, which can work in your favor. But closing a card can negatively impact your credit score.
Your credit report is a snapshot of how you use credit and what your risk is to potential lenders. But credit reports aren't always perfect. Get your credit report once a year and check for errors, like incorrect contact information, closed accounts that are listed as open, and late payments that you paid on time. If you find an error, credit bureaus provide forms that you can fill out when you have something to dispute. Stay financially fit, friends.