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| Credit Answers > Debt-Management-Articles-2009 > Credit Comeback |
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Many classic trends and fashions seem to be reinvented throughout generations. Fabulous fads from the past suddenly resurface and become popular among
consumers. At one time, you may have thought that a wallet full of credit cards with high credit lines exemplified style. But when minimum payments skyrocketed or you experienced
an emergency, the allure of credit quickly became a fad that you wish would have been buried in a time capsule.
Once you have completed your debt settlement program, you will be one step closer to financial freedom. At this time, you can begin to re-establish your credit and make a credit
comeback! Although your rating will not improve overnight, consider the following ideas to rebuild your credit.
Revolving Debt Is Not In Style
Many consumers realize that fashion and trends are fickle because they can change from month to month. Credit cards make it easy to charge all of the latest gadgets and just pay
a low monthly minimum payment. Making this a habit can create costly unwanted debt because of compounding interest. Also, consider the fact that you may still be paying on
merchandise that was purchased years ago or that is no longer used. Do you really want to pay for holiday gifts three years from now or clothes that will eventually wear
out or become outdated? You can discover the true cost of paying the minimum with this online calculator provided by Bankrate.com. When you begin to re-establish your credit,
use your credit card so you can show creditors that you can make timely payments. However, only charge items that you can afford to pay in full each month.
Less Is More
Stuffing your wallet with a deck of credit cards is not very impressive or fashionable. Upon completion of your program, apply for one or two credit cards, perhaps one major
card and one department store card. Remember that inquiries appear on your credit report every time you complete a credit card application. Having many recent credit inquiries
will usually not improve your credit rating.
Start Slow
With some fads, you may be unsure if you want to jump on the bandwagon right away. In order to gradually make your credit comeback, you may also want to consider a secured credit
card. The credit limit on this card is based on the deposit that you make. For example, if you put $300 on your credit card account, you will receive a line of credit for $300.
Since a secured card is considered a credit card, maintaining this account with moderate charges and on-time payments may boost your credit rating.
Some Offers Only Look Good On Paper
Did you ever buy a product that looked wonderful in the store, but once you brought it home it did not perform as well as you would have liked? This idea could also be true of
sub-prime credit cards. Upon completion of your debt settlement program, be aware of credit card offers that seem too good to be true. Sub-prime issuers may have lenient
approval guidelines, but prey upon individuals with previous credit problems by charging astronomical approval and annual fees. These companies commonly apply these fees to
your card. Therefore, you acquire a balance before you make any significant purchases.
Educate Yourself
Knowledge and education never go out of style. Become an educated consumer by understanding your credit card agreement. This may involve reading the tedious fine print, but it
is beneficial to know your annual percentage rate, due date, late fees, etc. According to a recent survey conducted by TNS, a market research firm, in partnership with
professors from Dartmouth College and Harvard Business School, high levels of debt may be correlated to financial illiteracy. The survey revealed that only 35% of respondents
were able to correctly estimate how interest compounds over time and more than half of respondents did not understand how minimum payments are calculated and applied to a
principal balance. The American Bankers Association (ABA) has developed a free resource to help consumers make informed choices about credit cards. "Guide to Credit Cards"
is available on ABA's Consumer Connection web page at www.aba.com. Make sure that you also check your credit report frequently.
You are entitled to receive a free credit report every year. For more information, visit www.annualcreditreport.com.
Become A Trendsetter
As a prelude to your comeback, you can become a trendsetter by practicing sensible budgeting techniques while you strive to settle your debts. Your friends and family will
hopefully follow you in your footsteps. Discuss with your family members various ways to save money and visit sites for frugal tips such as
www.Bargainist.com, www.101waystosavemoney.com, and
www.mommysavers.com.
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