How to Build or Re-Build Your Credit History

Posted by Dewey Kearney on October 20, 2010

When it comes to re-building credit history here’s a very unfair truth:

Paying your rent, utilities and phone bill late will be recorded on your credit report, but paying them on time is not recorded. You could still be turned down for a loan due to a lack of credit history or be blacklisted as having a poor one.

If you are just starting out it is important to establish a credit history before you actually need that car or home loan and it is easier than you might think. One of the simplest ways to establish a good credit history is through credit cards. I know you think I’m nuts but humor me!

If you have had credit for awhile but it got screwed up let me show you how to fix that. And again, it’s easier than you might think!

Let’s start with problem #1

No credit history – The best way is with a Secured Credit card. What’s that? It’s a credit card where you start by depositing a certain amount of money with the bank issuing the card. For arguments sake let’s say that you apply for the secured card and give the bank $500 deposit. The bank issues the card for that amount and some banks will give you a small amount (say $200 – it varies) in additional credit. Prove your ability to manage money by not overcharging and by making your payments on time. Never make the minimum payment, pay over and try to pay the amount down to zero every 2 months. You will be surprised at how fast your credit score will go up. Then after a year apply for an unsecured credit card. You will very likely be approved. It may be for a small amount but by exercising patience that will increase.

Someone once gave me the best definition of a responsible person; someone that can carry a credit card or even cash in their wallet without using it.

Problem #2 Rebuilding credit – Here you have some leeway. The steps mentioned above will work. However if you have a steady income you can apply for a Pre-approved auto loan. We have lenders that specialize in bad credit or no credit auto loans. You will be surprised at how easy it is. Once approved you take the approval notice to your nearest car dealer and select the car of your choice and drive out.

A word of caution: the dealer will do their best to get you into a higher priced car loan than you are approved for. They may even offer to finance it themselves. Don’t fall for this, it’s one of the oldest tricks since there have been car dealers. They will find a way to pack more than you can afford into the package and charge you an exorbitant rate of interest.

It’s better to start with a car that’s a couple of years old and work up. The auto lending company will already know what you can comfortably repay so don’t be flattered into biting off more than you can chew.

If you follow these steps your credit score will rise by a significant amount every month.

Go ahead and apply for that auto loan. What does it take to qualify? You need an income of at least $1500 per month to qualify but you will get a newer car and rebuild your credit score in the process. Approximately 95% of people who apply through our site qualify. Do it today!