If you are trying to fix bad credit, you probably know that you will need cash to collateralize secured credit cards and CD loans. Because of this, most people think that they are limited to establishing credit in proportion to the amount of cash they have. Because you want to establish between four and six positive active accounts, you may feel like it is going to take forever to repair your credit report.
Luckily, if you use the round robin method of credit repair, your investment can go much further. The tactic works like this:
You go down to your bank and open a CD for $1,000. The bank issues you a CD loan in the amount of $1,000.
You then take the money you got from the first loan and go to another bank and open another CD and CD loan. Repeat the process once more at a third bank. Once you receive the cash from your last loan, you will want to place it in a checking account that is specifically designated to repaying the loans.
You can also follow this method with secured credit cards. The major difference here is that you will need to make a cash advance each time and cash advancing usually has high fees associated with it. For this reason, you will want to reduce the amount of your credit line each time you get a new card.
As an example, you will get your first secured credit card w
ith a limit of $1,000, your second with a limit of $700 and your third with a limit of $400.
There are two caveats to this strategy. The first is that it will cause your credit score to decline in the short run due to excessive inquires and so many new accounts. This is not a method of fast credit report repair. As such, you should avoid this strategy if you know you will attempt to make a major purchase in the near future. Secondly, it is CRITICAL to not over extend yourself. Using this strategy you are essentially buying your credit rating back. Make a good budget and understand the debt burden you are taking on before you open an account.
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