Bad credit can happen to good people, but you don't have to despair. There are ways you can get your credit back in shape. The key to success is that you have to start working on it today -- and keep working hard to show potential creditors that you're serious about getting your credit back in order. As you do so, your credit score will improve, resulting in better credit offers and a substantial savings in money. To get started now, read and follow the detailed instructions below. The following is a summary of what to do. 1. Open new accounts and pay them off. Being able to repay a variety of new accounts is a key step in rebuilding your credit. That means that devising a strategy to open and pay off as many different kinds of accounts as you can is better than adding more debt to an existing credit card. 2. Start small. Rebuilding your credit can be similar to starting over from scratch, and starting small may be the easiest option. Credit cards from department stores or your local credit union can be useful. 3. Consider asking for help. If you can't qualify on your own, ask a friend or family member to cosign for a small loan or credit card. If you can stay current on a major credit card account or small auto loan, this will speed up the process of re-establishing good credit on your own. This should be your last option, not your first option. If you cannot be financially responsible with your own credit, and payoff the money you borrow, do not injure or damage your family and friends’ credit too!!! 4. Consider a secured credit card. They are guaranteed by a deposit that you make with the credit grantor. The cards offer the purchasing power of a major credit card. Just make sure the grantor reports payment histories to one of the three major credit bureaus so you're building your positive payment history. 5. Use your new accounts in moderation. And make payments that are more than the minimum. You can keep a small balance so that your positive payment history will continue to show up on your credit report. 6. Keep your balances low. Avoid carrying a balance that is more than 30% of your credit limit (creditors may view it as excessive debt that you may not be able to stay current with). 7. Check Your Progress You have taken the first step toward rebuilding your credit. Now it's time to take the next. Do you know where your credit stands? Find out by ordering your credit reports and scores. Order yours now for $30 at http://www.creditmatters.org. Be Patient-the Payoff Is Worth It It takes some time for your new credit history to gain momentum. You're demonstrating that you are not depending on certain credit cards and loans for your financial survival. That's why opening and paying down accounts may make it a little easier to get more credit. With patience and timely repayments, you'll likely be able to build a new credit history that creditors will look upon favorably when making decisions about your ability to handle even more credit. DETAILS TO UNDERSTANDING THE SYSTEM This program is designed to lead anyone, regardless of past or present credit problems to establishing or re-establishing a good credit history. Follow each of the steps and you will finish with three loans; at least two major department store cards; a MasterCard; and a Visa card. Best of all, you will be in complete control of your credit destiny. This should be done at the same time that you are using BLG to help you with the bad and negative entries in your credit history. This program is presented to you as an easy to follow, step by step, format. This is not to provide you with a complete road map to credit success, nor to necessarily make you an expert on credit overnight, but is an assistance in getting you started to achieve your overall financial goals. ACQUIRING BANK LOANS This is one of the most important steps in this program. By the time this step is completed you will have three excellent credit references to place on your next credit application. Why is this important? The next time you fill out an application take notice on how many references it asked for. They usually ask for three. You can use Savings and Loan, Credit Unions, or even a combination of these. To operate this maneuver you will need some beginning cash. Use as little as $1,000 or as much as
$5,000. The more you use the better. It is important to remember that this money will not be spent. It will be kept as security in a savings account until you are through using it. We recommend that you start with $1,000. LOCATE YOUR BANKS The first thing you need to do is locate your three banks. Get your local yellow pages and call around. Ask for the loan department and ask the following questions. 1. What is the yield on savings accounts? 2. What is the minimum a bank will loan on a passbook savings account? 3. What is the percent you can borrow? 4. You must also ask what credit bureaus they subscribe to, and if they report automatically, and if so, how often. Once you choose your three banks, the first step is to go to “Bank A” and open a passbook savings account. (Do not put money in any other type of an account, even if it does pay a higher rate of interest) Take your passbook home and wait three days. Then return to “Bank A” and ask to see a loan officer. Look your best, be courteous, and explain that you wish to take out a loan for which you are willing to place your passbook as collateral. This is the easiest type of loan to get because it is totally secured with cash. Most banks are willing to loan you 85% of the amount you have on deposit. When you take out your loan your savings account is frozen, however, every time you make a payment you unfreeze an amount equal to your payment, less a few dollars for interest. Be sure to ask that the loan be for at least one year, with minimum monthly payments. Do not get a simple one year loan with no payments. This will serve you absolutely no benefits whatsoever. What we are trying to establish is a payment history. You will not be turned down for this type of loan no matter what your previous credit history is and in most cases it will not even be checked. If you have bad credit, make sure you tell your loan officer before he pulls your credit history. Tell him you are trying to re-establish your credit, and that a good credit rating is very important to you now. Once you have obtained your $850 loan (85% of $1,000) take your money to “Bank B” and open a second passbook savings account. Wait three days and go get your second loan. This time in the amount of $723. (85% 0f $850). Again be sure it is an installment loan of at least twelve months. Take the money to “Bank C” and open another passbook savings account. Wait three days and go get your third loan. This time it will be for $614 (85% of $723). You now have three bank loans totaling $2187 and $614 in cash. Now don’t worry! You might be asking how you are going to pay off $2187 in loans with $614, but it is easy. As we mentioned before, every time you make a payment, an amount equal to your payment minus the interest is “unfrozen” in your account. (Figuring an interest rate of 12% on that $79.33, $8.50 is interest charged). Subtract this interest from the $79.33 and you get $70.83. This is the amount of principal paid back. Since your savings account calls for a 15% cushion above your loan amount, when you pay the $79.33 you “unfreeze” $70.83 which can be withdrawn without disturbing your loan collateral. THE PAY BACK PROCESS By the time you get your third loan, your first payment will be approximately seven to ten days away on your first loan. At this time, take enough of your $614 to make your first payment. Do this at “Bank A”, “Bank B”, and “Bank C”. You are ahead of your due date by one week at “Bank A”, two weeks at “Bank B”, and three weeks at “Bank C”. You have used $205 of your $614, but you have unfrozen about $182 of your frozen funds which you can withdraw at any time. Next, wait about three weeks and go back and make your second set of payments. You will be approximately a full month ahead on all your loans. With the balance of the $614, make your third payment at each bank on the second payment’s due date. Now you have spent the $614, approach each bank and withdraw the funds that have become unfrozen. This will be about $545. Once again, use this to make your monthly payments, always one full month ahead of schedule.
Continue this process through the sixth month. You can pay off your loan in full after you have reached your sixth month or you can follow it all the way through. It is not advised to try to pay them off prior to the six months as six months is unofficially the minimum history allowed when considering an account as a possible credit reference. Remember, the entire reason for this process is to establish your three banks as future credit references. This is not to acquire as much credit as you can. You are learning how to use credit wisely, not spend money you don’t have. HOW MUCH DOES IT ACTUALLY COST? In this example, the interest rate was 12%. However, the savings accounts were drawing 6%. This means your net interest cost was only 6%. The amount of interest charged for “Loan A” is $102. The amount of interest you will receive on your passbook savings account is $51. Therefore, we subtract $51 from the $102 and get a total one-year charge of $51. This amount is only $4.25 per month. But, since you are paying off the loan after making the sixth payment, your true cost is: “LOAN A” Six Months at $4.25 $22.50 “LOAN B” Six Months at $3.61 $21.69 “LOAN C” Six Months at $3.07 $18.52 TOTAL ACTUAL COST $65.61 That’s a small amount to pay for three references that you now have, and you still have your $1,000. It would be an excellent idea to contact your bank and ask what credit bureaus they report to. Contact the credit bureau and ask them to send you a “Credit Addition Form.” On this form, you list the piece of credit to be added, and mail the form back to the credit bureau and they will do the rest. Now, six months have passed, and the majority of your bad credit should have been erased from your credit file, and you should have three excellent credit ratings. You are now ready to go to the next step. ACQUIRING VISA / MASTERCARD If you wait until you have completed your three bank maneuver you should be able to get a Visa of MasterCard at just about any bank you wish. If you are in a hurry, it may be necessary for you to apply for a secured card. Now that you have your credit card, it is time to go shopping. First of all, go to a jewelry store in the mall near you and purchase an item that is equal to near the maximum of your credit card. Be sure not to buy a sale item, and find out how long you have to return the item for a full refund. Buy the item on your credit card and enjoy it until you have to return it. Be sure to return it before the final return date. At this time they will issue you a credit memo for your credit card. What is interesting is that a credit to your card is the same as a payment, and it will show on your credit report as a high, a “0” balance, and a “as agreed” payment. Next, go to a bank and make a cash advance near the maximum of your credit limit. Do not spend the money, but wait until your billing date and make a prompt payment in full. There will be a small charge for this, but it will provide you with yet another rating, separate from the previous rating. Now you can go to Sears, Wards, Mervyns, or many other department stores, and by showing your Mastrcard or Visa, qualify for one of their credit cards. HOW TO ADD YEARS OF CREDIT HISTORY IMMEDIATELY The final item to re-establish your credit is probably the easiest. What is necessary for you to add years of excellent credit history to your credit profile, is the love and trust of a friend or family member who has good credit. Each month when they receive their credit card bills, they are asked if they wish to add anyone to their credit card. By having them answer “YES” and adding your name, they will in fact cause a new credit card
to be issued in your name. They will, however, be a co-signer on that account. Since even those who love you don’t normally want to jeopardize their credit rating, you should have them use their address on the application. When they receive the card, ask them to cut it in half, thus rendering it useless. What will happen though is that by the issuing of the card it will automatically create an entry on your credit report, and instead of showing the application date, it will show an opening date of when the original card was opened and the entire credit history of that card. Therefore, without jeopardizing your friend’s or relative’s credit history, they have caused a positive credit history to be reported on your credit file.
REMEMBER, credit is a tool, it is not a way of life. Credit is a responsibility. If you use it wisely, it will work for you. If you use it foolishly, it will destroy you. Think about it seriously, apply for it seriously, use it seriously, and SERIOUSLY PAY IT OFF ON TIME! Christy Sandhoff www.my-blg.com/gofico (888) 332-6150