Is a Pre-Paid Credit Card the Best Way To Begin Re-Establishing Credit?
Many people have the same questions as this client and that is what is the best way to re-establish credit and would a pre-paid credit card be the best way to begin this process. The bottom line is to always pay your debts on time each and every month regardless of what they are. Also you never want to owe more money than you can afford in monthly payments which means approximately no more than 35% of you monthly income should go to debt payments including rent, mortgage and all loans and credit cards.
There are a number of steps to take to improve your credit rating and make it easier to find lenders who will lend money to you at reasonable rates. The first and foremost is to always meet all monthly payments on time each and every month. Never make a late payment and never have a check or payment bounce because of insufficient funds. This is a red flag to lenders and a big hit on your credit rating not to forget the expensive fees that banks and lenders charge for checks that bounce.
Consolidate your debt as much as possible into one low interest loan to reduce the monthly payments and the amount of interest you pay. Always pay down the highest interest debt first to reduce the amount of interest that you pay. This step will save you money and make it easier to repay your debt.
If you have a lot of debt, focus on paying the high interest debt off first and avoid all kinds of credit cards including a pre-paid credit card. If you do not have the money now, you probably should not spend more. Take the money you would have used to buy the pre-aoid credit card and pay off your debt first. This will save you interest and reduce your overall payments.
Be patient! Reports to credit rating agencies can stay on your credit rating for up to seven years. It probably took you a few years to get into this mess and it will take a few years of excellent money management to get out of the mess you created for yourself. Remember focus on meeting all of your debt payments each and every month so that no more late payments are made to the credit rating agencies.
If you have a lot of credit cards. Think about reducing the number so that you are not tempted. Close the store based cards first since they carry the highest interest rates, sometimes upwards of 30% on any unpaid balance. Stay away from payday loans since their interest rates are even higher and they come with hefty fees as well.
It will take time, but this is really the best way to begin re-establishing credit!
DEFAULT LOAN APPLICATION FOR BORROWER’S INFORMATION
Home/Mortgage Loan Amount :: $15,000
Home Loan Application and Processing Speed (when do you need the funds):: Pay off credit cards and begin reestablishing my credit rating. I would like to pay off my credit card debt as soon as possible and also begin improving my credit rating.
Do you currently have a mortgage? :: no, I currently rent
Bank Name and Branch :: Provident Bank, Main St
What City/Town, State and County do you live in? :: Riverside California
Zip :: 92501
What is your employment field? :: Construction
Employment Position :: General construction trades, foundation work, etc
When are you paid? (monthly/weekly/biweekly):: Bi weekly
Your credit rating to be – excellent, fair, or bad? :: bad
How did you find us? :: searching online for solutions to a bad credit rating
How are you paid? (direct deposit/paper check):: Paper Check
Gross Amount Per Paycheck :: $1107.69
Do you agree to have this information published online, without your PRIVATE information of course? :: Sure no problem, I just need some help to improve my credit rating and to also pay off my credit cards
Extra information here please (some detail):: Hi, I hope you can help me with some suggestions about the best way to go about re-establishing credit. I have a bad credit rating caused from past bad habits related to late payments and in some cases non payment of credit cards and other monthly payments. Things got a little crazy for awhile and I really did not focus on meeting the loan payments, the credit card payments and even my rent. I almost was evicted from my apartment due to chronic late payment of my rent. After that incident, I have seen the light as they say and now make sure that my rent is always paid on time. I am trying to improve my credit rating overall and was wondering is a pre-paid credit card the best way to begin re-establishing credit?
Note to Lender :: I work in the construction industry as a skilled tradesman and make decent money. I am working full time and expect to continue in this field. My income is steady and I really need to focus on dealing with this credit rating issue. I would like to buy a car and also some new furniture, but cannot get a loan. What is the best way to begin re-establishing credit and improve my credit rating?
|Category: Loan||APR 5%||APR 7%||APR 9%|
|Length of Term||5||5||5|
|Amount to be paid||$16,905.89||$17,668.25||$18,430.61|
|Total interest paid||$1,905.89||$2,668.25||$3,430.61|
|Paid per installment||$277.91||$290.44||$302.97|