fbpx

Is credit repair just disputing or do we need to build credit also?

It’s true disputing credit report factual inaccuracies is the cornerstone of credit repair. Getting rid of the inaccurate junk on your credit report will help your score rise. We have already discussed other activities that can raise your score such as paying on time, not canceling older trade lines, not applying for new credit and maybe even riding the tradelines of others. All of these activities should come first before you apply for new credit to help build credit and build your credit score.

When should we build new credit? When can we ignore the applying for new credit advice and add some credit for the continuation of building our score? In the first couple of months, we want to kick off all the negative (inaccurate) information and monitor the effect that has on your credit score. What about when we finally get that first boost? We have several options we like the first is for you to get a secured credit card as we have discussed in an earlier article. A major reason to get a secured credit card is it will usually turn in to an unsecured credit card within a certain period if you pay on time.

There are other tools such as a Fingerhut account where you can make overpriced payments on items, but most are items you might actually buy. They have been a friend to people with poor credit for a long time. Some other tools are Horizon Gold Card, with a $500-$3000 credit limit, Online store purchases only it reports to Transunion only and has a $25 monthly fee to report. Hutton Chase $1500 credit line and a $180 min order to activate an account they report to Equifax and Transunion only, it has 60 days until 1st credit bureau reporting and costs $25 per month to report. My Jewelers Club has a $5000 Credit Limit, a membership fee of $99 and a minimum order of $100 they report to Experian, Transunion, and Equifax it reports on the 1st business day of each month. Don’t get me wrong none of these are great retailers and I don’t recommend using any of them unless you need to build credit.

After that secured credit card whats the next step? We have teamed with Austin Bank to bring you Credit Strong! Credit Strong emulates an installment loan. It works from you picking a payment from 15.00 to 250.00 dollars a month and then they report that as an installment loan (build credit loan). The installment loan they give you they place in a CD as collateral for the loan. The larger the loan reported the more it will raise your credit. Unlike other tools of this type, some of their products let you cancel the loan if you no longer find it useful (when your score has risen enough). They also give you an actual FICO score to monitor.

Sometime store cards would be the next phase of credit repair or even a gas card. Retail cards that require a lower credit score are easier to get approved for. We just had a customer that was in the mid 600’s apply for a Macy’s card and get approved. The limit was $400.00 a month. You might want to apply for a store card or a gas card as your credit score gets to that level. If you get rejected by one retailer don’t keep applying. Stop and wait for your score to increase.

Somewhere in the credit repair process, your score will hit a new point and you will start getting new credit card offers. Many of them say you are prequalified you should use these to build credit. It should not be a surprise that these companies have run a soft inquiry on your credit report. Remember soft inquiries have no negative impact on your score because you have not authorized them. This is that signal your score has hit that happy place when you get your first legitimate non-secured credit card offers in the mail. You can use one of the offers sent to you or go to Capital One’s website to prequalify and they will not run a hard inquiry on you to prequalify you for the card.

No matter what you can only add one of these at a time and probably no more than once every 4 to 6 months so you can let your credit history age. Remember the goal here is not to build credit fast but to build it sturdy and build credit history. Yes, all of these same tactics work for building credit after a bankruptcy. Put the card on auto-pay so you don’t miss a payment. Set the auto-pay on the minimum so it won’t overdraft your account. If you have questions about your credit score and proper credit building don’t hesitate to contact us so we can get you one your path to healthier credit.

*This article contains an affiliate link for Credit Strong but we recommend the Credit Strong product because it appears to be the best in its class.

Newsletter signup

Get our monthly newsletter full of financial, credit and insurance wisdom!

Please wait...

Thank you for sign up!