How To Rebuild Your Credit Fast – Part 2 of 3
On my previous post I shared how to rebuild your credit fast using a secured credit card. If you missed my post, then click here to read about it. That strategy alone is very effective and has allowed dozens of families that I have personally helped increase their FICO score by more than 100 points within 12 months.
Of course, these results aren’t guaranteed just because I don’t know if you will take action or if you will do any of these strategies. Either way, you will see some sort of improvement within a short period of time.
On my previous post I told my story about how and why I taught dozens of couples how to rebuild their credit. If you would like to read about that story, then click here.
Here I’m going to share a couple more strategies on how to rebuild your credit fast.
How To Rebuild Your Credit Fast – Strategy #2 – Secured CD Loan
This strategy takes a few more steps, but if applied it is very effective. The whole idea of this is to get a loan secured by a CD. In case you are wondering what a CD is, it is a Certificate of Deposit. Pretty much all banks offer this sort of investment. In a nutshell, a CD is where you deposit a certain amount of money for a certain amount of time which will pay you an interest rate higher than your savings or checking account.
CD’s are normally done for 6, 9 or 12 months. So for this example, let’s use $1,000 deposited into a 6 month CD. Don’t expect a high return on investment on a CD. At the time of this post they are lingering around 1%.
After you have done this process, you then wait for 2 weeks. You then walk back into your bank and ask them for a 6 month, $1,000.00 SECURED LOAN. This loan will be secured by your $1,000.00 CD. So if you were to default on the loan, the bank keeps the CD. The loan will have a much better interest rate as opposed to a non-secured loan. This is because the bank virtually has no risk.
You can expect to pay around 1% – 3% on a secured loan. The bank will give you a $1,000 loan and then issue or send you a 6 monthly coupon book to make your monthly payments. Very important: DO NOT SPEND THAT $1,000.00.
You put the $1,000 the bank loaned you into preferably a interest bearing savings account or money market checking account. These types of accounts have very low interes rates, but it will still help to pay for the interest rate you will pay towards the loan. Expect to get around 0.75% on your account.
You will then wait 2 more weeks and walk into your bank and make your first payment. Do this every 1 – 2 weeks and you should pay off the loan within 2 months. This is HUGE in the eyes of the credit bureaus because since the bank will be reporting to the credit bureaus that they issued a 6 month loan in the amount of $1,000.00, they will also notify the credit bureaus that you paid off the loan in about 1/3 of the time.
You will want to do this 2-3 more times. So after you finish paying off the first loan, you do it all again 2 weeks later and ask for another $1,000 secured loan. After 3 or 4 loans have been paid off, around 8 months should have gone by. You then at this point walk in to your same bank and ask for a $500.00 UNSECURED loan. Very important that you ask for half of your previous loan. At this point you will have built trust with your own bank and their is a HIGH probability that they will issue you the $500.00 loan.
You then, pay off that new $500.00 loan within 2 months. After that, ask for a $1,000.00 UNSECURED LOAN… then repeat the payoff process. Then ask for $2,000.00 and repeat the pay off process. Within 18 months, you will be able to ask for $10,000.00 loan and they will lend it to you because they TRUST you.
This is probably the most effective way on how to rebuild your credit fast. At this point, the credit bureaus saw all the action with your loans and how fast your paid off your loans and obviously your FICO score will go up VERY quickly. The only downside of this strategy is that your money will be tied up during this time. But if you are able to see passed that, this strategy alone will boost your FICO score rapidly.
Stay tuned for my next post where I will be sharing the 3rd part of this series on how to rebuild your credit fast using somebody else’s good credit.
P.S. If you would like to learn EXACTLY how I make money with this blog, then click here.