How Can I Rebuild My Credit After It Has Been Damaged?

Posted Saturday, February 27th, 2010. Filed Under Financial Empowerment

This question came to Maritza while reading an article by Suze Orman. We have been dealing with debt and for this question period we wanted to focus on rebuilding your credit. It is truly my belief that you can change your financial position in a very short period of time. It is about taking baby steps — it may take some time.

Question: How can we rebuild our credit after it has been damaged by unpaid debts or we had to go through a bankruptcy? The answer, according to a recent article written by Suze Orman, is to get a prepaid credit card. Instead of going to a bank, she recommends going to a credit union and apply for a secured credit card.

For those that do not know what a secured credit card is, here is a more detailed definition:

A “secured credit card” is a credit card used to build a good credit record for people with a damaged or poor credit score or for people with little or no credit history. A secured credit card requires a security deposit in order to be able to establish a line of credit. Typically, the line of credit you qualify for will be equal to the amount of money deposited with the bank or financial institution that issued the secured card.

For example, you can open a $500 secured card line by depositing $500 in an account associated with the credit card. Many secured cards charge fees for opening the account, and then charge fees for accessing your funds. In some situations, a prepaid debit card with a credit builder option may be a less expensive way to build credit.

Secured credit cards are also referred to as “prepaid credit cards“.

To find out more go to credit unions to search for one in your area. Request that the credit issuer will report your payments to at least one of the credit bureaus – Two well known ones in Canada are Trans Union or Equifax.

I recently asked for my credit rating from Trans Union – this is free — I wanted to know how I stood in the “eyes of my creditors”. I received it and now I want to run through it with someone. I saw a lot of 0s which I believe is good. I too need to find out!

AS FOR THE CLOSET… once you have dumped everything out of your closet and decided what you are going to keep then you can begin to rebuild. It will take some time. Decide how much you will put into this endeavour of rebuilding. Once you know your budget and how much you can spend – you will know how much you will budget for new items. You must be committed to sticking with this number. Like the prepaid credit card, you will only be able to spend that $ figure that you have committed to.

One day you will look at your closet and say – how did I do this? I have a full closet and I know where everything is and I feel good about this.

Take the baby steps to rebuilding your credit history!

All our best,

Sandra & Maritza

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