Building good credit will take time
By Liz Pulliam Weston
Los Angeles Times
Q. My husband and I have been unable to finance a badly needed four-door used car because our credit isn't good enough. Car dealers have graced us with copies of our credit reports, but these turned out to be papers with numbers that are incomprehensible. I've tried to order free credit reports on the Internet, but the deals are usually come-ons for other services and require a credit card — which we don't have. What do we do now?
A. When you don't have good credit, you have to start building it. Unfortunately, the process takes time, which means it may be a while before you can get that badly needed four-door used car.
Start by getting copies of your credit reports from each of the three major credit bureaus: Equifax, at (800) 685-1111; Experian, at (888) 397-3742; and TransUnion, at (800) 888-4213. These reports will be more user friendly than the ones you saw, which are designed for lenders who are familiar with the credit process.
You should scan the reports for any errors, accounts that aren't yours or negative information that's more than seven years old (or, in the case of a bankruptcy filing, more than 10 years old). The reports include information about how to get these problems corrected.
Pay attention to the reasons given for your credit score not being higher. If it's because you have unpaid bills, you probably need to satisfy those before your score will improve. If you have late payments, that should underscore the need to pay all your bills on time. If it's simply because your credit is too new or you don't have many credit accounts, then your real work begins.
Start by applying for a card from a gas company or a department store, which usually are the easiest to get. Use the card lightly but consistently, charging something every month and paying off the balance.
If you apply for a couple of these cards and don't get approved, don't apply for others because that could hurt your score further. Instead, consider getting a loan from your credit union or a small bank — perhaps one that's backed by your savings account or other collateral — and pay it back over time.
After a few months of paying either the cards or the loan on time, you also might apply for a secured credit card. These require you to deposit money and give you a credit line equal to your deposit. (You can learn more about these at Bankrate.com, which has a list of the best secured card deals.) Look for a card that will convert to a regular credit card after a year or two.
Once you've had a regular credit card for a while, you should be able to get approved for a car loan and get a decent interest rate.
For more information on building or rebuilding credit, get a copy of Robin Leonard's book, "Money Troubles: Legal Strategies to Cope With Your Debts" (2002, Nolo Press). Good luck.
