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Ask Dr. Don
By
Don
Taylor,
Ph.D.,
CFA
•
Bankrate.com |
Past transgressions and used
transmissions
Dear Dr. Don,
I currently have a credit score of 544, which I
know is not very good. I am 22 years old and in the past I did not
know much about credit. I am completely out of debt now (debt combined
was over $5,000) and have paid off my car loan through my credit union.
Would I have a better chance of getting a used car loan for $5,000
through my local credit union, or should I use the on-line loan route
for people with bad credit? In view of my past debt, is there anything
I can currently do to improve my credit worthiness?
Jonathan Jalopy
Dear Jonathan,
Your credit union is the place to start. It will let you know where
you stand and will be more likely to work with you on a new loan.
While you're checking out your credit union, you can also look at
what terms the Internet lenders offer to people with poor credit
histories.
With a credit score of 544, you don't have much downside
left. The good news is that you can rebuild your credit over time
by staying current on your bills and managing your credit accounts
and credit applications. Almost all negative information on your
credit report drops off the report after seven years, but it won't
take seven years to get your credit score out of the 500s and into
the 600s.
Every time you apply for credit, the loan application
is reported on your credit report. It's one thing if you're shopping
for a car loan or a mortgage. If you make multiple inquiries in
a short period of time (over three to four weeks) for a secured
loan, your credit score won't be hurt. It'll be clear that you're
comparison shopping and you won't have multiple mortgages or car
loans outstanding. Multiple credit card applications send a different
message, making it look like you're desperate for credit -- and
lenders hate lending to desperate people.
Bankrate has partnered with myFico.com to feature "Estimate
Your FICO Score" on Bankrate. MyFico.com also has a credit
score simulator you can use when you purchase your credit report
and score. The sample simulator shows how steps you can take in
managing your credit can affect your credit score.
-- Posted: Feb. 27, 2004
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