February 8, 2009

Do you need to rehabilitate your credit?

What a life, to be young and foolish. How many of you have gone
somewhere such as a sporting event and been enticed by the promise
of a pen, free hat, or tee shirt, provided that you sign your name on the bottom line of a credit card application. It was a great deal, you got something for free with virtually no effort, and the added bonus of a card that entitled you to spend as much as you wanted provided that it didn’t surpass $250.00 or sometimes even $500.00 dollars. You were in your late teens or early twenties and it really didn’t dawn on you that this actually had to be paid back, and of course within a certain time frame.

Flash forward several years and you are ready to embark on your life’s journey perhaps with a wife or husband by your side. You have learned your lessons well, 1) that you never spend what you don’t have, 2) you pay back everything on time, and 3) stay away from credit cards. Now you are well on your way to rehabilitating your tarnished credit. Wrong! Numbers 1 and 2 are certainly cardinal rules to follow but number 3 although it seems like sound advice is not practical in our cashless society.

You can liken your bad credit to a hangover, and the best way to ease your ills, is by taking “a hair of the dog that bit you”. You have to rehabilitate your credit by re-establishing your ability to repay debt. Credit cards are the hair of the dog that bit you. They were your downfall and they are what will build your credit back up.

Getting a new credit card is not that easy for you to do this time around, because as you can imagine the credit card companies are in business to make money, and so are more inclined to do what is best for them. Your tarnished record does not make you a likely candidate for another go round with any credit company. There are however two ways to get a card. 1) You can get a secured credit card by depositing $1000.00 with the credit card company so that now you have a credit limit of $1000.00 and it shows up on your credit rating as a regular card as opposed to a pre paid card. 2) There is also the chance that you may get someone to be a guarantor for you so that if you default on your payments, the credit card company knows that they will still get their money.

The trick is that once you have a card with the help of a guarantor, your primary duty is to start making small purchases utilizing this wonderful piece of plastic, with the sole intention of paying it back on the due date in its entirety. You will find that after a while the credit card companies will be willing to give you a chance to fly solo.

Another step to take is to open a bank account, and by using the same method try to establish a line of credit. The prime directive as in the previous exercise is to pay back everything on the due dates, and never spend what you don’t have, because otherwise you will end up falling into the same downward spiral that got you into this mess the first time around.

These actions are the road one must take to improve their beacon score, which is the credit benchmark used by banks when determining whether or not, to grant you a mortgage. Some banks will even reward you with a lower interest rate if your beacon score surpasses their criteria for excellence.

Good luck in you efforts, and perhaps one day soon, you will be the proud proprietor of your own dream home.

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Jack Lehrer is a successful mortgage broker in Montreal who has been in the realm of customer service for over 25 years. Treating his clients with the respect they deserve is what has propelled his business. His satisfied clients not only return, but pass his name on to their friends. His greatest pleasure comes from helping a client realize their dreams. As a Mortgage Broker he is able to make your life easier. He searches for the best mortgage terms and rates from over 20 financial institutions to find you the right mortgage. If you are planning to renovate, buy a house or refinance your mortgage, then he is your best choice for all your mortgage needs.

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