Managing Your Credit and Debt

Reestablishing Credit

Reestablishing credit can be tough to do if you have a poor credit history or have declared bankruptcy. The bankruptcy filing remains on your credit record for up to ten years, and creditors obviously shy away from people with a bankruptcy record or a bad credit history.

Here are some basic steps you can take to start the process of reestablishing your credit.

  1. When you've built up savings in your bank savings account, take a "passbook" loan. The account will be frozen for the amount that you have borrowed. Repay the loan on schedule and this will demonstrate your willingness to be responsible about your debt.
  2. Have a loan co-signed by a family member or friend. Remember, though, if you can't make the payments, he or she will be liable for the balance.
  3. Get a debit card, which looks and acts like a credit card, except that it takes money right out of your checking account. Some financial institutions will issue that to you as a "first step" on the way to a regular credit card.
  4. Get a department store charge card. These are generally much easier to get than Visa or MasterCard. But be sure to make your payments on time!
  5. DON'T pay a "credit agency" money to have your credit reestablished. They can charge high fees, and rarely do more for you than you can do for yourself.
You'll need to be patient in order to reestablish credit. It will take time.
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