Rebuild Your Credit - Using a Savings Account?
By Ed Nailor
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!
Ed Nailor is a loan officer with Atlantic
Equity Mortgage in Charlotte, NC as well
as webmaster and website designer. His
latest website is http://www.BestNewCreditCards.com
and offers information on all types
of credit cards. For those seeking to
rebuild credit, check out http://www.BestNewCreditCards.com/poor-credit-cards.htm
for the best credit cards for bad credit.
For more information on financing options
for North Carolina properties, visit his
website at http://www.droprent.com.
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