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Sunday, February 16, 2014

How do I Restart my credit rating

                            Restarting your credit can be a tumultuous task. It involves a lot of dedication to not only get someone to take a chance that you will pay back the loan,but you will do so  in a timely fashion . It may take some saving of some funds, ney, it will take some saving of funds and it will take some patience. This will not happen overnight or even over a month or so but, with hard work and dedication. Also, take stock in the fact that it will not be fair although the financial institutions are said to be following the fair credit act. Lets cover that first.
                            It will not seem fair to you that you will be paying a much higher interest rate than someone who has a better credit rating. This seems kinda upside down that those with more money get the better rate but, it is better explained that those who have not been as late on repayment in the past are the ones who get the better rate.In my experience, I have had people with incomes in the upper crust of society who have horrible credit (500 - 600). I once questioned this to my finance person"how can someone who makes that kind of money have such bad credit?" The answer was very simple, It makes no difference, even if you make a million a year but,think you can spend one million and one dollar to live on, you simply can't pay all your bills, ipso facto, your credit score goes down. The more your credit score goes down the higher your interest rate will be on the next loan.
                               It also will not seem fair that you will be required to come up with a higher down payment. This is usual as the bank or financial institution  loaning the money may want you to have some skin in the game. You may think that the measly $20,000.00 you want won't break the bank and you would be right but, The officer at the bank has his/her job on the line. They are the ones looking over your payment history and if they approve you and you default, it's kinda like three strikes and your out.
                                 The higher down payment may also be to get the item being purchased within loan value.For instance, you want to buy on time, a $20,000.00 car. Even if the bank says the car is within loan value, when you add tax of maybe $1400.00 and title cost, the loan is now over loan value so, you will need to pay the difference between the two.
                                   Another factor can be the fee the bank will charge to approve the loan. This is really thought of as unfair by those wanting the loan but not so much by those granting it. In my opinion it could be done differently. It would still cost you money in the beginning but could be given back as a reward.  The fee charged by banks to approve a loan for a customer varies. For someone with a near perfect credit score, the bank will charge a minimal fee for granting the loan. For someone who's credit score is below 500, I have seen the fee as high as $3,000.00 or more and a very high interest rate.maybe 25%.and only loan 80 - 90%  of the value of the merchandise. In short: That $20,000.00 car may well be valued at that amount but, the bank will only loan $18,000.00(90%) on it, meaning you have to come up with the other $2,000.00. Even if the car lot is selling the same $20,000.00 car for $17,000.00 + tax + title = $18,000.00 (roughly) plus a loan fee of $2000.00, again in this case, you must supply the $2,000.00.
                                  You are basically paying someone to give you another chance. To prove that you can be trusted. To regain your pride and your ability to purchase on credit. I use a car loan because it is believed that a car loan paid on time over the course of time will rebuild your credit faster than say buying  a watch or repaying a credit card on time.
                                    If you are serious about jump starting your credit score, be prepared to take some money out of pocket. Maybe as little as $1000.00. Maybe less but rarely.
                                 Also, this is not done yet but maybe in the future, I think we could show some appreciation to those who knuckle down and follow through with their new found credit by giving back maybe at least 75% of an extremely high bank fee when the loan has been repaid on time throughout the term of the loan. For example: your bank fee is 2,000.00 and you make your payments on time (every single one) The bank,in my opinion, should rebate you 1500.00 when the final payment is made. As I said, this isn't how it is but I think it should be.



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