Struggling with bad credit

[JTulo]

My best friend is 7 1/2 months pregnant, her boyfriend just left her, and she had to move back home with her mom just to survive. Her credit is awful. Does anyone have any tips I can share with her on how she can build her credit up?

[jebri]

If she were to take out a small, short-term loan, for something like a hundred dollars, and repay that on time, I think it would possible to build credit. Because it's such a small amount, it will be easy to pay back and the interest won't amount to much. But because it's still borrowing money from a bank and not a friend or relative, it will register on her credit report. Though it is a small step, credit-building is a long process and any small thing you can do helps.

[JTulo]

That's a great idea. Have you done anything like this before? Are you able to take out loans with really bad credit?

[jebri]

I've never done it before, but I think if it's a small enough loan, I don't think it's too difficult. Even with bad credit, if you have something you can use as collateral, it shouldn't be as difficult to get a small loan for a couple hundred dollars as it would be to get a loan for a house or a car that's a longer term and higher amount involved. In any case, it seems to me that a bank would be much more willing to loan someone a hundred dollars than a few thousand. They have a lot less to lose, and if you take out a loan that's small enough that you can be sure you can afford to pay it back on time, you could have a lot to gain and try to get your credit score back on track.

[JTulo]

That's not a bad idea. Thanks for the advice! I'll be sure to pass it on to her. She needs all the help she can get! Thanks again!

[mangie]

The most important part of a credit score is how many credit cards (revolving) and how you manage them (utilization). No disrespect at all to the other members, but taking that same 100 and getting a secured credit card would have more impact on her credit. If she keeps the balance below 10% of her limit, typically after 6 months they'll convert it into a regular card...then she's on her way. One step at a time.

[Barb]

Not all secure cards are legit. Some have annual fees, some extort the client, some you have to buy insurance to cover the cards monthly use and this could cost up to $50 monthly and some the initial deposit which is any where from $300 to $500 is used up in the start up/set up fees the first month. You will not be able to use the money until you pay back the start up fees. This is your money and you should be able to use it immediately. Some Credit Unions offer a secure credit card and you will find that they are more reliable then those you find online. Check out your local credit union bank before you try to secure a secured credit card elsewhere.

[laur22]

Credit unions can be great resources for people with bad credit. They offer better rates and are generally more understanding than regular banks. While the rates and fees may not be great for people with bad credit or no credit, they are likely better than those that you would find at a bank. It's definitely a good place to start.