Managing Debt For Dummies
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The credit history rebuilding process is not difficult, but it takes time. Your goal is to add positive information to your credit history by obtaining a small amount of new credit from a reputable creditor, paying it off according to the terms of your credit agreement, securing additional credit and paying it off on time, and continuing the pattern.

While you are applying for small amounts of credit and paying it off on time, the negative information in your credit history starts to go away. Federal law says that most credit information can stay on your credit report for only seven years and six months.

A bankruptcy can remain in your credit history for ten years. If you’ve defaulted on your student loan or your child support obligation, you can expect that information to stick around until you’ve cleared up the debts. Federal tax liens are reported until you pay what you owe and get the liens released.

As long as you manage your finances responsibly while you’re rebuilding your credit, the amount of positive information in your credit history will gradually increase. Eventually, creditors will pay more attention to the positive information you’re adding than to any bad information that still remains in your credit history.

  • Use a credit card to begin the rebuilding process: If you have too much negative information in your credit history, you may not qualify for a regular MasterCard or Visa right away. Instead, you may have to apply for a secured card.

    Credit card companies are entitled to change the terms of your credit card whenever they want, as long as they tell you about the change at least 15 days prior to its effective date. They may make a change because a lot of negative information has been added to your credit history since they gave you credit or because your credit score has dropped. Sometimes a creditor makes a change in credit terms that applies to all its cardholders.

    You can use your MasterCard or Visa card in one of two ways to rebuild your credit:

    • Use your card to make small purchases each month and pay the card balance in full and on time.

    • Use your card to buy something essential and relatively expensive, and pay off the card balance over time. Always try to pay more than the minimum due each month, and avoid charging anything else on the card until you’ve paid off each balance.

  • Get a loan: Set up an appointment with a loan officer at a bank in your area to discuss your borrowing needs. Explain what you have done to improve your finances. Let him know that you have begun the credit rebuilding process and, as part of the process, you would like a small bank loan.

About This Article

This article is from the book:

About the book authors:

John Ventura: John is a best-selling author and a nationally boardcertified bankruptcy attorney. He is also an adjunct professor at the University of Houston Law School and the director of the Texas Consumer Complaint Center at the Law School.
As a young boy, John dreamed of becoming a Catholic priest so he could help everyday people, and he spent his high school years in a Catholic seminary. After graduating, however, John decided to achieve his dream by combining journalism with the law. Therefore, he earned an undergraduate degree in journalism and a law degree from the University of Houston Law School. Later, he and a partner established a law firm in Texas, building it into one of the most successful consumer bankruptcy firms in the state. He subsequently began a successful consumer law firm in South Texas.
Today, as Director of the Texas Consumer Complaint Center, he supervises law students as they help consumers with their legal problems. He is also a regular speaker at law conferences around the country and serves on the Bankruptcy Council for the Texas Bar Association.
John is the author of 13 books on consumer and small business legal matters, including Law For Dummies, 2nd edition; The Everyday Law Kit For Dummies; Divorce For Dummies, 2nd edition; and Good Advice for a Bad Economy (Berkeley Books). John has been interviewed about consumer money matters by numerous national media including CNN, NBC, NPR, Bloomberg Television & Radio, The Wall Street Journal, USA Today, Newsweek, Kiplinger’s Personal Finance, Money, Inc. Martha Stewart’s Living, Bottomline, Entrepreneur, Bankrate.com, CBSMarketWatch.com, and MSNMoney.com. In addition, his comments and advice have appeared in major newspapers around the country, and he has been a frequent guest on local radio programs.

Mary Reed: Mary Reed is a personal finance writer who has coauthored or ghostwritten numerous books on topics related to consumer money matters and legal rights. The books she has coauthored with John Ventura include The Everyday Law Kit for Dummies, Divorce For Dummies, and Good Advice for a Bad Economy (Berkeley Books). Mary has also written for the magazines Good Housekeeping, Home Office Computing, and Small Business Computing, and she has ghostwritten numerous articles that have appeared in national and local publications.
Mary is also the owner of Mary Reed Public Relations (MR•PR), an Austin, Texas-based firm that provides public relations services to a wide variety of clients, including authors, publishers, attorneys, financial planners, healthcare professionals, retailers, hotels, restaurants, and nonprofits.
Prior to starting her public relations business and writing career 20 years ago, she was vice president of marketing for a national market research firm, marketing director for a women’s healthcare organization, and public relations manager for Texas Monthly, a national award-winning magazine. She received her MBA from Boston University and her BA from Trinity University in Washington, DC.
In her free time, Mary serves on the board of a community development corporation in her neighborhood. She also enjoys long morning bike rides, road trips with her husband, gardening, working her way through the stack of books by her bed, taking care of her six cats, and spending time with her family and many friends.

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