Whether you have no credit or bad credit, bad debt-credit loans might help you to repair or build credit. These aren't for everyone, but in some cases they can make it easier to obtain larger loans or regular credit cards later on. If you want to build a positive credit history, read this quick guide about bad-debt credit cards.
Making loans and going in debt are easy, but credit repair is not if one or more of your loans go sour. Some of your creditors will report to your credit history each time you're late on a payment (usually over 30 days late). So even if you feel you have paid faithfully, any slow pay or late payments can lower your credit score even if you've never had a repossession or foreclosure.
What are Bad Debt-Credit Loans?
Also called bad debt credit cards, these loans are offered by a credit card company when the company issues a certain type of credit card to persons with poor or no credit. This type of loan requires a security deposit up front to secure your credit card loan. If you pay it back without defaulting, your security deposit will be returned to you. You might qualify for an unsecured credit card once you've proved your trustworthiness.
The downside is bad debt-credit loan cards often carry an annual fee and a monthly maintenance fee as well as late fees and high interest rates. These can be a nuisance, but are well worth it if you want to start building a good credit reputation in a hurry or if you want to repair past credit damages.
Keep in mind that if you've had a bankruptcy, it can take months or even years to rebuild trust with creditors. Start small with bad debt credit cards and try to never be late on a credit card payment. This will prove that you are making an effort to get back on your feet. Once you "pay your dues," other lenders will begin to trust you as well. As you pay small loans back (on time), you can start increasing the amount of money borrowed and eventually get to a place where you can get an automobile loan or home loan in the future.
Other Credit Repair Methods
There are other ways to repair your credit. You can opt for a debt consolidation loan, which combines all your debt payments into one loan with a lower payment. This can result in longer pay-off periods as well as higher overall interest rates, but it's worth the effort if it enables you to pay your monthly bills on time. You can also speak with a credit repair company that specializes in rebuilding trust with creditors and getting certain bad debts removed from your credit report.
You might also want to try and repair your credit on your own. You can easily obtain a copy of your credit report online from Equifax or another reporting agency. Viewing your credit report and credit score will give you a full scope of the debts that are affecting your credit rating in a negative way. Armed with this valuable information, you can begin to pay off the debts or negotiate with certain companies to get those removed from your credit report.
With bad debt-credit loans, you will not only start rebuilding and repairing your credit, but you can also start rebuilding your financial future. Check out online services today that offer bad debt credit cards with reasonable payback plans.
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Chris Robertson is a published author of Majon
International. All Rights Reserved. Copyright 2010 (Sat Sep 06 2008)
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