Payday Loans And Repairing Your CreditWe live in a consumer society where it seems like more attention is paid to your credit record than to your criminal background. Credit has been elevated to a position where it permeates every factor of a person’s life and has even crossed over into the realm of being a moral question. Have you ever been made to feel guilty or embarrassed because you can’t get a loan? What about having your credit card rejected at a restaurant or department store? It’s not just that you don’t have money readily available, it’s that you suddenly become a pariah in the eyes of some cashier. And, of course, to everyone that is standing around within hearing distance.
Nearly everyone has been in one of these situations one time or another. And, it begins to weigh heavily on your psyche. Don’t despair! Having bad credit does not mean you are a disreputable person AND there are very few credit situations that are beyond repair. You just have to know what steps to take and what order to take them in. If you are careful, payday loans can be an excellent means of reestablishing your credit.
There are several ways you can go about clearing up your credit situation.
A payday loan may be able to help you re-establish your credit. The way it works is like this. Get the best loan deal available, with the least fees. Make it small, say for $100. If you can find a lender who only charges $10 per hundred, you will owe $110 on your next payday. Even if you have to pay a $25 charge for the $100 borrowed, the total payment is still only $125. Pay it off on the due date, in full. Do not be tempted to roll the loan over because it will just cost additional fees. Don’t borrow unless you know you will be able to pay back the full amount on the date due and do not borrow from multiple lenders. Repeat this process several times to build a good reputation with the company. Payday transactions are ones that may or may not be reported to credit agencies, but you can generally add good reports to your own credit profile. It may cost $2-$3 per lender and you must ask the lender before proceeding.
According to the Credit Repair Institute, a Visa or MasterCard are the best credit references you can establish.
At first glance, this may not seem like a great solution because you are thinking that you probably can’t possibly get a credit card. However, there are banks and other lenders out there who will issue limited value credit cards to people with bad credit, on a couple of conditions. First, you will probably have to pay a fee to get the card in the first place. Then, it will probably be limited to a small amount, say $200. Pay the fee, get the card (making sure that it doesn’t charge huge interest) and use it very, very wisely. In other words, go make a small purchase on the card instead of paying cash for something that you already intend to buy and have money for. Then, use the cash you already had set aside to pay the credit bill, before the due date, so there are no additional interest fees. Repeat the same process several times, over several months. Always make sure you are not buying something extra that you may not have money to pay for, just use the card to establish good credit.
Other banks issue secured credit cards for which you deposit a particular amount, for example $200. Make the deposit, get the card, and then make several small charges on it – again ones that you know for certain you can pay back in full before the due date so that you don’t accrue any extra interest fees. Shop around for the card and make sure you get the best deal available in terms of annual fees, annual percentage rates, grace periods and any surcharges that may be attached. Secured cards are nearly as good a means of bolstering credit as unsecured ones.
Get a Loan
That sounds like crazy advice, but if handled the right way, it can quickly rebuild your credit. According to the Credit Repair Institute, this is a fast and reliable method, and can be done with as little as $400. It involves opening a savings account at a local bank with about $400. After the account is established, ask the bank for a loan and tell them you want to secure it with the savings account. They are likely to grant you at least 70% of the money you have in savings and, in some cases, up to 100%.
Take the money from the loan and deposit in a savings account at a second bank, get a loan against that and deposit that in a third bank. The money borrowed from the last bank can help pay the first few payments on the others. Make certain that you make payments on time and as agreed. Also make certain that the banks report your payment history to the three major credit bureaus, monthly.
According to the Credit Repair Institute, this is the quickest way to rebuild credit quickly. In the meantime you will be paying for it by paying interest, but the good news is that the interest earned on the funds deposited in savings will partially offset the interest payments you will be making back to the bank.