News


Financial Flash Newsletter

Time to Rebuild your Credit?

Do's and don'ts to help get your credit back on track.

“Whether building a credit history from scratch, or trying to improve a tarnished one, it’s important that consumers recognize the impact that a positive credit file can have on their financial well-being," said Celeste Collins, OnTrack WNC Executive Director

OnTrack WNC suggests the following do's and don'ts that consumers should follow to help make the road to credit smoother:

  • Do obtain a copy of your credit report from www.annualcreditreport.com. This is particularly useful if you are trying to rebuild your credit, as you’ll want to review what existing debts you need to satisfy before moving forward. Don't be led astray by some sound-alike report sites, which typically offer a free report only if you sign up for a monthly monitoring service.
  • Do open checking and savings accounts. Even though this activity is usually not reported to the credit bureaus, having established a banking relationship will count in your favor.
  • Don’t apply for too much credit at once. This can appear as though you’re desperate for credit and perhaps make lenders less inclined to extend credit to you. Further, too many credit inquiries can have a negative impact on your credit score.
  • Do apply for a variety of credit types. Credit scoring models value having different types of credit. Therefore, having some revolving accounts (typically credit cards) and some installment fixed payment loans (such as a car payment) can improve your score.
  • Do research the type of card that is right for you. Each issuer has different lending standards (yes, a credit card is a loan), so you’ll only want to apply for cards from those whose lending profile you fit. Familiarize yourself with the various standards by going to www.CreditCards.com or www.Bankrate.com.
  • Don’t fall for a credit repair scheme. Why pay for something that you can do for yourself for free? If rebuilding credit, know that time is your friend, the more time that passes from the financial distress, the less negative impact it has. Handle your new credit responsibly and you’ll soon have a solid credit file.
  • Do consider a co-signer. Obtaining a loan in the absence of any credit history can be difficult, sometimes requiring a co-signer to guarantee payment. The loan is usually structured where the primary borrower is expected to make the payment, with the pay history reported in both names. If the borrower defaults, the lender will approach the co-signer and missed payments will be reflected on both credit files. There is a risk to the co-signer, but if handled responsibly, co-signing can be an effective way to help another person obtain and build credit.
  • Do consider a secured credit card. This type of account is secured by a deposit made to the financial institution issuing the card. For example, if you wanted a card with a $500 limit, you would deposit that amount with the bank offering you the card. Know, however, that secured cards can have fees attached to them, and typically have a higher interest rate. The account activity is reported to the credit bureaus each month, and after responsibly making payments on a secured card, the issuer often offers the borrower an unsecured card.
  • Do take out a small loan. A personal loan from a bank or credit union can serve to establish credit. You may be asked to put up collateral, but it will be worth it in order to build your credit.

“Equally as important as establishing credit is treating it responsibly. Pay your bills on time all the time and your credit report will be a tool for getting good interest rates and terms when you need to borrow money,” continued Collins.

For more assistance on understanding your credit report and how to improve it, call OnTrack WNC at 828-255-5166 ext. 3 or 1-800-737-5485 and schedule a Credit Review appointment with one of our counselors.

United Way NFCC Council on Accreditation