How I Rebuilt My Credit Score from a 580 to 743

Using Credit Wisely is one of the key things to leverage your way to an easier life. Why is having good credit so important? Below are my Top 4 reasons:  

Shelter – Having good credit has a huge effect on your mortgage qualification and rates or approval for rental. Lenders evaluate your credit history to access the risk of you paying them back on time or at all. A landlord wants to make sure you're able to pay them in a timely manner for the place they're lending you.

Transportation – With today's economy, everyone does not have a huge amount of cash to purchase a car without taking out a loan. Having bad credit can limit the amount you can borrow due to higher rates or get you disqualified altogether. Having bad credit can increase your insurance premium as well.

Employment - Many employers conduct credit checks as a part of the hiring process. If you haven’t demonstrated financial responsibility, a prospective employer might be hesitant to hire you. For example, the employer might believe your level of debt is too high for the salary offered.

Entrepreneurship – Leverage is one of the most important things when starting a business. Some businesses require a large amount of upfront cash to get it started and this is where you'll have to take out a loan. The better your credit, the more you'll receive with a lower rate and less risk of high payments.

Remember, the entire reason for this process is to (re) establish three 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.

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.

Delete negative information 1st.

This should be done 1st -- deleting negative entries in your credit reports yourself, or by using a credit repair service to help you with the bad and negative entries in your credit history. 

You Need Some Cash

To begin, you will need some 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.  

Find 3 Lenders

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, Banks, or even a combination of these.

Before You Go to the Lender,
Call and Ask…

…the following questions. 

•         What is the yield on savings accounts? 

•         What is the minimum a bank will loan on a passbook savings account? 

•         What is the percent you can borrow?

•         You must also ask what credit bureaus they subscribe to, and if they report automatically, and if so, how often.

1st STEP

•         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.

2nd STEP

•         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. 

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