If you’re looking to start fresh with your credit, you may be wondering what options are available to help rebuild your credit score and repair your credit history. If you’ve made mistakes in the past, you may be afraid of applying for new loans or lines of credit, especially if your current situation isn’t ideal. Fortunately, there are several credit restoration services that can help you gain control over your finances and build the foundation for a bright financial future. The next time you need help repairing your credit, consider contacting one of these three companies to see how they can help you out!
1: Home Equity Loan
Many people don’t realize it, but you can use your home as an asset when borrowing money for credit restoration. There are a variety of lenders out there willing to provide what’s called a home equity loan (sometimes just referred to as a second mortgage) specifically for people with bad credit. This is one of your best options if you have other debts that you want to pay off as well. After all, it usually won’t make sense financially or emotionally to take on additional debt if all you need is credit restoration services. With a home equity loan, some lenders will be willing to refinance your existing home loan and consolidate your debts into one new payment. Others will require you to take out a brand-new loan. Either way, though, expect interest rates to be high—as much as 20 percent or more—and expect a long repayment period of 10 years or more. If possible, try to pay off your credit card balances before taking out a home equity loan; it’ll help lower your overall interest rate and shorten your repayment period.
2: Line Of Credit
A line of credit, also known as a credit line or credit limit, is like overdraft protection for your credit card account. This feature allows you to draw more money than what you have available in your current balance—up to your set maximum—if you can make payments on time. For example, if you have a $1,000 line of credit on a card with an annual fee of $75 and an interest rate of 15 percent, that means you’ll only be charged if there’s a negative balance remaining after each monthly billing cycle. Plus, many cards charge lower interest rates if you pay off your full statement balance each month. #3: Credit utilization ratio: If you want to improve your credit score, it’s important to keep track of how much credit you use compared with how much credit you have available. The higher your ratio is above 30 percent, the worse it will affect your score. For example, if you have a credit card with a $5,000 credit limit and you owe $2,500 on it, your credit utilization ratio would be 50 percent. That said, not all accounts are created equal when calculating your credit utilization ratio; mortgage debt isn’t included in calculations because it takes years to build up enough history to accurately assess its impact on your credit scores.
3: Personal Loan
One of the fastest ways to establish good credit is by applying for a personal loan. These have low-interest rates and can help you build a solid history, Bennett says. For example, if you take out a $10,000 loan at 5 percent interest and pay it back over five years, you’ll end up paying $332 per month — but since your debt will be paid off quickly, your credit will have time to improve before you apply for other loans. You can view current rates on various types of personal loans.
Credit card: Another easy way to get started with credit is by getting a credit card. You should aim for a secured credit card that requires an upfront deposit between $200 and $500, Bennett says. This deposit is typically held as collateral against your credit limit. If you don’t make any late payments or exceed your credit limit, after 12 months you should qualify for an unsecured credit card with no deposit required. Make sure you understand all terms and conditions before applying for a credit card.