Rebuild Your Credit - Using a Savings Account?
Did you know that in addition to a good credit card, you can
also use a savings account to establish or repair your credit?
You can, and it's easy! Follow these 5 simple steps and you can
rebuild your credit for next to nothing!
1. Open a Credit Union Savings Account Call your local credit
union tell them you want to open a savings account. Depending on
the credit union you may need as little as $25 to open an
account and between $300 to $500.00 to make this program work.
If you don't have enough cash yet, don't wait. Open your account
with the minimum requirement and begin to deposit as often as
you can. Most credit unions require a small amount ($5-$25) to
remain untouched to keep the account active. The remainder will
be used for this program.
2. Take out a Loan Secured by Your Savings Once your account is
open and has the minimum available, take out a Secured Share
Loan. This loan will be secured by your savings, and usually has
a very low rate (avg 4-6%.) In most cases you can choose any
repayment terms you like. If you plan to buy a home within the
next 90 days, choose a 12 month repayment. Why? Once you have 10
months or less left, most lenders will not count the payment
against your debt load! Also, request that the repayment to
begin right away so there is no delay in building your credit!
3. Deposit the Loan Funds back into Your Savings Account Don't
go on a shopping spree! Have the credit union deposit the loan
funds directly back into the savings account. Remember, this is
to build your credit, not put you in debt! Now your account will
show double the amount you placed in savings... For example:
$500 for your savings (the secured amount), and $500 from your
loan. This may also help if you need to show a mortgage lender
additional savings!
4. Set up Automatic Drafts from Savings to Pay Back Loan Ask to
have the monthly payments for the loan drafted from your savings
account. Now you are using the loan money to repay the actual
loan, plus any interest. (For our $500 example, interest should
cost you less than $25 a year!) Payments will be made on time
and without any worry! You may need to add just enough money to
cover the interest on the loan. One of the best features of this
program is that if you ever need your $500 for an emergency,
simply have the loan completely paid off with the remaining loan
funds in the savings and your initial deposit will be
released... With no additional debt!
Rebuild Your Credit... Using Your Savings! Try to find a credit
union that reports to ALL three major credit bureaus... Equifax,
Experian and TransUnion. You can use multiple credit unions if
you need to... Just make sure that at least 2 bureaus get
reported to or you are wasting your time. (2 scores will bring
up the middle score!)
Add to the mix the right credit card with a low balance and
great payment history, then you will be on your way to higher
scores!