Ask Stacy: How to Get Credit When the Only Credit You Have Is Bad

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If your credit is so bad you can't get even a secured credit card, here are the steps you can take to rebuild it.

Ever feel so low you have to look up to see the bottom?

That’s how it can feel when nobody wants to grant you credit, or even let you have a checking account. Talk about not being able to buy a break.

Here’s this week’s reader question:

Can you shed some light on consumers who have poor credit, unable to have a checking account due to being in ChexSystems, and are being declined for a secured credit card. Thank you! — S

In case you’re not familiar with ChexSystems or secured credit cards, here’s the skinny.

Secured credit cards are the easiest plastic to get because you put up a deposit equal to your credit line, thus securing the card. For example, you put $500 in a security deposit account, and the bank gives you a credit card with a $500 credit line.

Because the bank has collateral and is taking no risk, almost anyone can get this type of card.

So why would anyone who can fog a mirror be turned down? Several reasons. If you’ve burned this bank or issuer before, you may simply be blacklisted. Another possibility: Based on your income or history, the issuer isn’t interested in your business. A $500 credit line isn’t very profitable, so the hassle may not be worth it to them. Or, they may have policies prohibiting issuing plastic to anyone who recently filed bankruptcy or has accounts in collection.

So while a secured card is easy to get, nothing is guaranteed.

The other thing S mentions is ChexSystems. ChexSystems is one of several companies that maintain databases of consumer checking account history. They gather and report history to subscribing banks, which they use to see how risky you are as a potential customer. For example, if you left a bank with a negative balance, bounced a bunch of checks, lied on your application or otherwise messed up, other banks can find out and refuse your business.

As we’ve explained, you can request your ChexSystems report here.

Now let’s look at the four-step process for building, or rebuilding, credit.

Step 1: Recognize you’re on a long road

While there are techniques you can use to begin re-establishing credit, realize that getting back to a great history and score is going to take time. How much time depends on how bad your credit history is.

Chapter 7 and Chapter 11 bankruptcies remain on your credit history for up to 10 years, while a discharged Chapter 13 will fall off after a maximum of seven. This doesn’t mean you’re shut out that long. It’s possible to get credit, albeit not at stellar terms, immediately after a bankruptcy. And as time passes and the negatives fade, it will get easier.

But it’s important to know there’s no trick that will magically erase serious negatives and instantly give your credit score a significant boost. Rule of thumb: If anyone promises a quick fix to your credit, they’re lying.

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