Building Credit with New Accounts If you are working to rebuild credit, you are doing two things: 1. Eliminating the bad credit marks on your credit reports 2. Obtaining new credit and using it responsibly Most would think that the first step is harder than the second, because it involves settling old debt collections or disputing debts. This can be a hassle. However, the second step can often be the most difficult for people. You would think: “Well how hard can it be? Apply for a credit card or loan and pay it on time!” But the whole reason you’re in this mess in the first place was because you couldn’t do that! Regardless, there are terms and conditions that apply with obtaining any form of credit. It is imperative that you read and understand these terms because they will govern the conditions of your credit account. Location of Terms and Conditions Many times, as with credit cards for bad credit, you must read the terms and conditions BEFORE you even apply for the card. By sending in the application, you are saying to the credit card companies: “I am fully aware of what I am getting myself into if you opt to approve my application.” In the case of a direct loan, such as a sub prime loan with a higher interest rate, you don’t have to read the terms and conditions until AFTER you are approved and BEFORE you sign the papers accepting the loan. The reason that these companies are able to lend to those with lower credit scores is because they maintain a much higher Annual Percentage Rate (APR). These companies are borrowing money at a higher rate than a bank does, therefore it must charge the consumer more to lend the money out. On the same note, they are taking on a higher risk. You, as a consumer with poor credit history, are much riskier to lend to than someone with good credit. They have proven they can be trusted with a credit line. Therefore, many companies and high interest bearing credit cards enforce very strict terms and conditions that you must obey. Their Legal Abilities Once You Sign If you fail to pay, do not pay on time, or do not pay enough, these companies may have the right (based on what you signed) to sue you, garnish your wages, or repossess any and all property that you may have used to secure the loan. Additionally, there may be certain details about the APR that you were not aware of. Some credit cards, like retail credit cards you can obtain through places like department stores, have a 0% interest rate for a certain number of months, and then it changes to something like 24.99%. Seems easy right? It’s not. If you do not pay off the balance you accrued during that 0% interest period, you will be charged all the interest for the entire balance leading up to the APR change-over. That’s not fun. Furthermore, some cards have annual fees that will be automatically deducted, so you need to read the terms and conditions to be aware of that. Also, some of the lending companies may get you to sign something during the loan closing that allows them to obtain information about you from anyone they want, such as friends, relatives, employers, and coworkers. That’s embarrassing! In sum, read the terms and conditions, carefully. Don’t skip through it like it’s gibberish. It’s speaking in regards to your current and future financial situation, so you should probably attention. For more credit help check out some related articles and federal law. You don’t have to just live with the high cost of bad credit! For more tips visit: yourbadcreditcard.net/credit-building-accounts/
Posted on: Thu, 15 Aug 2013 17:44:39 +0000
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