If getting back on track and rebuilding credit is important to you, you probably want to finance something. Maybe you want a credit card, to buy a car or house or maybe a fancy yacht? There are several steps to getting back on track, especially when you have a goal in mind. It’s important to identify everything that’s currently affecting you. If you haven’t done so, run your credit to find out exactly what currently on your profile.
Depending on your situation there are several aspects to credit repair. Therefore, it is important to know your options. Follow these simple steps to determine how to move forward.
Create a Budget
What can you pay towards debt, if anything? When you create the budget at this point, only be concerned with “must haves”. Thinking about this rationally, you need food/water and shelter. After those then start adding car expenses (car payment including insurance and gas) or transportation (public if necessary). You will also need to consider federal debts.
Prioritize Debts
Are you dealing with car repossessions, facing foreclosure, do you have wage garnishments and/or judgments? Some of these debts are more serious than others. For example, if you need car for work and public transportation is not available the car payments and associated expense are must haves. When you prioritize debt make sure to consider the critically of the debt and the ramifications if the creditor takes action against you.
If a creditor charges off or credit account becomes a judgment, it will become part of county public records. Once this occurs, the debt stays in public records despite its deletion off your credit report. When you go to finance a house or car the lender will do a public records search for any outstanding or unpaid judgments. If you are told by a creditor you will be sued you will want to talk to an attorney about filing for bankruptcy.
Federal Debt
Many times bankruptcy will not allow federal debt obligations to be forgiven or altered. Federal debts generally must be paid. Additionally, once a federal creditor has a judgment they will pursue wage garnishments and/or bank levies. Because these debts are federal – they have access to monies that other creditors normally don’t. This includes social security and social security disability insurance payments, but not supplemental security income. Any tax liens or tax debts will not go away, even if you file bankruptcy.
School Loans (Federal and Private)
Some school loans are a federal debt and even private school loan are a challenge to discharge by bankruptcy. Federal debt (school loans, tax liens, etc.) must be paid. Private school loans you can attempt to file bankruptcy for. While this is difficult it is not impossible. Definitely speak to a lawyer when trying to handle school loans. Read more about defaulting on school loans here.
Getting Back on Track Rebuilding Credit
There are several steps to getting back on track, especially when you have a goal in mind. It is true that derogatory items are deleted off your account after approximately 7 years. It is also true that there is a statute of limitations or length of time that a debt collector can attempt to pursue legal action for collection of debt. But remember, debt is never gone, even if it’s charged off, or deleted from your credit report.
Once debt is removed from your credit report your credit score will start to rise. But, taking some steps to repair your credit will help your score go up faster. To the point where you can begin purchasing things and getting credit again. And, after the derogatory items are completely gone you can find yourself with credit scores in the high 700’s as long as you remain responsible. The following steps will involve you getting a second chance bank account and a secured credit card. These two items will require you have money saved.
Most of the money will be saved for you. It is either, money that must stay in your bank account or money a creditor will hold for you. A comfortable number to start off with is about $600. If you have less you can still follow the plan. Having a good cushion can help you avoid monthly fees in some cases with second chance checking account and give you a little more of a balance on a secured card. But, you will find as you read on – you can accomplish your goals with less so read on.
Getting a Bank Account (Second Chance Bank Accounts)
If you are unable to get a bank account it’s probably because of negative information on one of the financial system verification systems, Telecheck, Early Warning Services, ChexSystems w/SCAN. When you get a bank account, both your credit and these systems are checked.
These systems operate the same way as the major credit bureaus except they report on how a consumer handles deposit accounts at banking institutions. So if you have had an account closed for negative balances, unpaid overdrafts a bounced a check or even fraud, the information will be in this report.
Under the Fair and Accurate Credit Transaction Act (FACTA) amendments to the Fair Credit Reporting Act (FCRA), you are entitled to a free a copy of your report from these systems once every 12 months. ChexSystems is the only agency that has an online portal, the get your report from the other two, you must contact via phone or mail. Below is the contact information for these agencies.
Highlighted Second Chance Checking Accounts
Chase offers a second chance bank account called Chase Access Checking. Unfortunately, you cannot find much information about this account online. This account has a monthly fee of about $17 dollars that’s unavoidable. Be sure to get the details of this account if/when you visit a chase branch.
Wells Fargo offers a second chance bank account called Opportunity Checking. Wells Fargo is in 40 states and DC, so they are a good option if there is a branch near you. Information on this account is available here.
A third nationwide bank that offers a second chance account is PNC. They offer an account called Foundation Checking. PNC reports to ChexSystems and if you have a negative profile there, this could help your situation. After approximately 6 months you can upgrade your account. Be sure to get details when you talk to a banker. For a complete list of banks by state, click here.
Getting Secured Credit Cards
Once you have a bank account start thinking about your next move to improve your credit. The best option is a secured credit card. A secured credit card uses a deposit you place into an account as collateral. Because the creditor takes this collateral from you, the risk to the lender is minimized. Creditors are then willing to lend to people even if their credit is flawed. Most of the secured card lenders will allow customers with credit scores in the low 500’s. After a time of responsible payments, your credit is increased because you have displayed responsible borrowing. Read more about secured credit cards here and see if one is right for you.
If you credit scores are lower than 500 – there is still a secured card for you. Make sure to take this chance and rebuild your history and move on from past mistakes.
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