One little advertised strategy you should use when learning how to repair credit is applying for a passbook loan. This technique will give you great results when you choose to do it yourself. Basically all you have to do is deposit money into a blocked CD or savings account where you can’t have access to the funds. You also surrender your passbook to the bank and waive any ATM privileges.
Not all banks offer this type of loan. You may have to spend some time trying to locate a nearby bank that offers one. Banks don’t actively advertise this type of loan to people with financial issues on their record. If you can’t find a local bank willing to offer one, a personal loan will accomplish the same thing. However, you may be required to secure a co-signer or provide some sort of collateral for the loan (but don’t use your house).
When you find the right loan, be sure to go over these important features:
1) Be Sure It Reports To The Three Major Agencies
Make sure the lender supplies your payment history to the three bureaus. After all, this is the main reason you’re taking out the loan. If you find the bank doesn’t work with the three bureaus, move on to the next bank.
2) Find Out The Minimum Deposit
Ask the bank what the minimum deposit requirement is to open a passbook loan. Deposits can range anywhere from as little as $50 to as much as several thousand dollars. You need to find one that you can afford. When teaching my readers how to repair credit, I recommend a minimum passport loan of $1,000 if you can afford it. This amount is high enough to have a healthy impact on your FICO score when you do it yourself.
3) High High Is The Interest Rate?
With these type of loans, don’t expect the interest rate to be low when you have a record of financial problems. You should also expect the interest earned on the account to be less than the rate you pay on the loan. That’s how the bank profits from your loan. You may question whether it’s worth spending the extra money just to take out the loan, but let me assure you the benefits to your score make it well worth it.
4) What Are The Terms
You’ll find most passbook loan terms to last anywhere from one to five years. For the best effect on your score, I recommend you take a minimum term of 12 months. This provides a long enough time to make a positive impact on your score. You also save on the interest payments.
5) What Is Your Borrowing Limit?
Banks won’t lend up to the full amount of your deposit. You’ll find they typically lend up to 80-95% of your deposit amount..
Though a passport loan isn’t widely advertised to people with financial problems, it’s a great tool to use as you learn how to repair credit and do it yourself.