This article, entitled 5 Tips to Live With Bad Credit -- and Make It Better, comes from Angela Colley at partner site MoneyTalksNews.com.
Have less-than-perfect credit? You’re not alone. According to this 2010 Wall Street Journal article, nearly 1 in 4 Americans had a FICO credit score of less than 600.
With a better economy, however, comes better scores: According to Equifax, in the third quarter of 2012, there was a 2.1 percent decline in sub-prime (credit score less than 620) borrowers compared to 2011.
Still, however you slice the numbers, there are millions of Americans with bad credit – a situation that can be inconvenient, costly, and last for years.
That’s the bad news. The good news: There are things you can do to ease the pain, and things you can do to make it stop sooner.
And bad credit doesn’t equal defeat. Of the 47 percent of respondents running credit checks, 80 percent told the SHRM they’d hired a candidate with negative remarks on their credit report.
So, if you’re faced with a pre-employment credit check, here’s how to deal:
Co-signing isn’t something I’d recommend for renting, borrowing, or in any other situation. Why risk a personal relationship when there are landlords willing to rent to you on your own?
If you have to pay a higher security deposit, so be it. I called a landlord in my hometown (New Orleans) and she said she normally charges half a month’s rent for a security deposit, and a full month’s rent with bad credit.
You may not get around the higher fees, but you can make things easier…
But you have options. If you don’t like the idea of being penalized with a high deposit, go with a prepaid plan. They’ve improved in recent years: You’ll pay full price for the phone, but the monthly service is reasonable. For example…
If your bad luck or bad behavior is truly in the past, start building good credit by getting a credit card, using it, then paying the bill in full every month. If you can’t find a card that will take you, check out secured credit cards. As the name implies, this is a card secured by a bank deposit equal to the credit limit. Since the card company has nothing to lose, even those who filed bankruptcy last week can get one. But make sure it reports your on-time payments to credit reporting agencies – not all do.
Another option is credit unions. While getting a credit card or other type of loan may not be a walk in the park, credit unions tend to have looser standards and better terms than banks. See our story 7 Reasons You Should Join a Credit Union This Week.
Most bad marks will remain on your credit history for seven years – a Chapter 7 bankruptcy, for 10. But it’s not as bad as it sounds, because the older the bad stuff gets, the less it matters. Plus, there are things you can do to speed things up.
For example, one of my friends dreamed about buying a house. To get the ball rolling, she ordered her credit reports and scores, only to find she fell in the sub-prime range. For the next year, she worked on repairing her credit: She disputed five items, repaid two loans ranging from $500 to $2,500, negotiated with three different creditors to have collection accounts removed, and diligently paid her bills on time and in full.
She said she spent a ton of time, but it was well spent: After one year, she was a prime borrower – something that saved many thousands in interest when she got her mortgage loan.
The bottom line: You’ll have to work hard to raise your credit score, but if she can do it, so can you. We’re here to help; check out the links below.
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