Expert: David McArthur - 11/9/2008

Question
I have a lot of charge-offs on my credit report which I paid all of them off approximately 4-5 years ago. I have been trying to reestablish my credit but everytime I apply for something I get turned down. How do I re-establish credit when absolutely no one will give me credit? I live in Washington DC and I believe the statute of limitations for a bad debt to fall off your credit report is 7 years. Should I just wait out the additional 2 years that I have to go for everything to be deleted/fall off my credit report before trying to re-establish credit? I'm just tired of being turned down for credit. Right now I have no credit.

Answer
Betty,

This is part of the unfortunate cycle people deal with when trying to reestablish. The best suggestion I have is to stop applying for unsecured credit, especially cards.  Each time lenders inquire of your credit it damages your already fragile credit score. The best way to establish at this point is with a secure credit card-something small and bank sponsored would be great. There are many on the market so please do your homework in this regard.  Some larger banks require accounts with them and no derogatory credit history in their underwriting criteria, so spend some time researching what will work for you.

Secure credit cards have a small limit which you set with your initial deposit. Ideally, you will keep your purchases very low (less than 40 percent of your limit) and pay them off every month. This will help to add positive information to your credit report. Usually at some point you will get back your original deposit.  It might go into a short term cd or something like that so don't count on it to make your payments. If it used by the company that means you have defaulted and that shows as a negative on your credit report.

That being said, make sure the card you select actually reports to all three major credit bureaus.  Otherwise it does not help you.

There are other strategies that can help you.  My specialty is helping people raise their credit scores.  Please visit me at www.financialscoringsolution.com for more suggestions.