How do I rebuild my credit after a financial crisis?

Ralph Estep Jr.:
00:00

Have you ever felt like you're drowning in a sea of debt with no life raft in sight? Well, today, we're throwing you a financial lifeline. Stick around and learn how to rebuild your credit after a crisis, including some unconventional methods you might not have considered. It's Wacky Wednesday so we're going to embrace some unconventional ideas today.

Ralph Estep Jr.:
00:28

Before we dive in, let's take a quick look back at yesterday's show. Yesterday, we discussed how to set healthy boundaries with social media from a Godly perspective. Remember folks, your time is precious. Use it wisely, both online and off. You know, I was speaking with a client yesterday and he said something. He said "Ralph, before I make any financial decision, I always head over to your website and do a search and see if you did a show on that topic." You can do that as well my friends. Just go to askralph.com, click on search, and you'll find over 400 past episodes of all things financial.

Ralph Estep Jr.:
01:05

Now let's get to today's hot topic. But first, I want to share a message from one of our listeners. This one comes from Jackie in Sacramento, California. And Jackie writes this, "Dear Ralph, I've been a faithful listener of your show for the past year, and it's been a blessing in my life. However, I'm facing a huge challenge right now. Last year, my small business went under due to unforeseen circumstances and I had to file bankruptcy. Now, my credit is in shambles, and I feel like I'm starting from scratch. How can I rebuild my credit? Are there unconventional ways to do this? I'm willing to try about anything at this point. Thank you for your guidance and your prayers."

Ralph Estep Jr.:
01:51

Well, Jackie, thank you for your heartfelt message. I know many of our listeners can relate to your situation. Financial crises can happen to anyone, and they often leave us feeling lost and hopeless. But remember, with God's guidance and some practical steps, you can rebuild your financial life. Welcome to The Ask Ralph Show, mastering your finance from a Christian perspective. I'm your host, Ralph, and I'm here to help you achieve financial freedom while growing in your faith.

Ralph Estep Jr.:
02:25

Before we dig into the answer, I want to share a Bible verse that I think is particularly relevant to today's topic. It's from Proverbs 24:16, which says this, "For though the righteous fall seven times, they rise again, but the wicked stumble when calamity strikes." Now that verse is powerful and should give us all some real hope. This verse reminds us that setbacks are a part of life, even for us that are righteous. What matters is not that we fall, but that we get back up again. And that's exactly what we're going to talk about today. How to rise again after a financial fall.

Ralph Estep Jr.:
03:09

Now let's address Jackie's question and explore how to rebuild credit after a financial crisis, including as I promised, some unconventional methods. First, let's start with some conventional ways to rebuild your credit. Number 1. Check your credit report. The first step is to know where you stand. Get a free copy of your credit report from each of the three major credit bureaus. This is a time to review them carefully and dispute any errors you find on them. As always, you can get that at annualcreditreport.com.

Ralph Estep Jr.:
03:37

Number 2. Make timely payments. Your payment history is the most significant factor in your credit score. That's the top thing. This is the time to set up automatic payments or reminders to ensure you never miss a due date. And listen, this is crucially important after bankruptcy when you're trying to restore your credit. Number 3. Keep credit utilization low. Try to use no more than 30% of your available credit. If possible, pay off your balance in full each month. Let those things cycle, but then pay the whole thing off.

Ralph Estep Jr.:
04:12

Number 4. Become an authorized user. You can ask a family member or friend with good credit to add you as an authorized user on their credit card. There positive payment history can boost your score. Number 5. You could consider getting a secure credit card. These cards require a cash deposit which typically becomes your credit limit. They're easy to qualify for and it can help you build your credit over time because truthfully, the lender has no risk.

Ralph Estep Jr.:
04:37

And number 6. Consider a credit builder loan. These loans are designed to help people build back their credit. The money you borrow is held in a savings account while you make payments. The best part of this though, it's reported to the credit bureaus. And I did a show a few weeks back on this very topic. So I encourage you to check it out.

Ralph Estep Jr.:
04:55

Well, now, as I promised, let's get to some unconventional methods that might help you rebuild your credit faster. Now, listen, I'm going to tell you this ahead of time. These are truly unconventional ideas and it's imperative that you do your research before moving in this direction. But you asked for some unusual ideas so here they are. First method. Rent reporting services. There are companies out there like Rental Kharma and RentTrack that report your rent payments to the credit bureaus. This can help build your credit, especially if you don't have many other accounts. You can check them out online and see if they're a good fit for you.

Ralph Estep Jr.:
05:28

Second method. That's what we call self-lender programs. These programs allow you to lend money to yourself and repay it over time. It's sorta like that credit builder loan. The payments are reported to the credit bureaus helping to build your credit history. Basically, you're building up a savings account that you're able to access as a loan once it grows. There are many of these plans online. Just do your homework and read the reviews. Third method. Utility and phone payments. Some newer credit scoring models include utility and phone payments. Consider services like Experian Boost or eCredable that report these payments to credit bureaus.

Ralph Estep Jr.:
06:05

Fourth method. It's called peer to peer lending. Platforms like Prosper or LendingClub may be more willing to work with you than traditional banks. You just have to be cautious about the interest rates they're charging. I'd also check with your local credit union. You know, I have a little bias there because I used to be in that industry and see if they offer any programs for those looking to rebuild their credit. With them being member driven, a lot of times they do.

Ralph Estep Jr.:
06:27

Fifth method. It's what we call Microloans. Organizations like Kiva, that's K-I-V-A, offer small loans with very low or no interest. Now, while they might not report to the credit bureaus, it can help you establish a positive payment history. The sixth method is secured cards with unusual collateral. Some companies offer secure cards or use alternative forms of collateral, like your car title. But again, you got to be cautious of these cause you might lose your car if you go into default.

Ralph Estep Jr.:
06:54

And finally, the seventh method and this isn't a new one. Credit repair companies. While not exactly unconventional, working with a reputable credit repair company can sometimes yield faster results. You got to just be wary of scams and do your research. Again, I did a show a few weeks ago about what to look for in selecting a credit repair company. So I encourage you to check that out.

Ralph Estep Jr.:
07:15

Overall though, you got to remember, building credit takes time and patience. It's not just about the method you use, but also about changing your financial habits and your mindset. So here's some actionable items you can take right now. Number 1. Make a list of all your debts and create a repayment plan. No matter where you're at, that you can do. Number 2. Set up automatic payments for all of your bills. It doesn't matter what stage of financial distress you're in. Set up automatic payments for all your bills.

Ralph Estep Jr.:
07:46

Number 3. You're going to hear it, create a budget and stick to it. You know, I love budgets, but the truth is it will definitely help you in rebuilding your credit. Number 4. Again, something I talk about all the time and that's to start an emergency fund to avoid future financial crisis. It amazes me how many times we could have averted that financial crisis if we just had that emergency fund. Number 5. Educate yourself about personal finance. Read books, attend workshops or take online courses. Listen to podcasts just like this one. It's all about developing your financial skills. And last but not least, number 6. Pray for wisdom and discipline in managing your finances.

Ralph Estep Jr.:
08:29

Well now I want to share a personal experience that relates to today's topic. A few years ago, I had a client, let's call him John. He found himself in a similar situation to Jackie. John had lost his job and went through a difficult divorce, which led to a bankruptcy filing. His credit score had plummeted. And he felt like he'd never recover. We started working together, implementing both conventional and unconventional methods to rebuild his credit.

Ralph Estep Jr.:
08:53

One thing that worked particularly well for John was becoming an authorized user on his sister's credit card. His sister had excellent, fantastic credit. And within a few months, John's score started to improve. But here's the unconventional part. John also started a small side business selling handmade crafts online. He used a microloan from a local nonprofit to get started. Now the loan wasn't reported to credit bureaus, but it helped him establish a positive payment history with that organization. Later, when he needed a small business loan, this positive history helped him secure better terms.

Ralph Estep Jr.:
09:26

The key takeaway from John's story is this. Rebuilding credit isn't just about the numbers. It's about rebuilding trust with lenders and more importantly with yourself and with God. It's about proving that you can be responsible with the resources you're given. Now, listen. I do work with clients and financial counseling. So if you want to schedule a consultation with me, you can do that at askralphpodcast.com/store. We can sit down and talk about how to improve your situation.

Ralph Estep Jr.:
09:53

Remember folks. Financial setbacks don't have to define you. There are opportunities for growth and learning. As it says in my favorite book of the Bible, Romans chapter 8, verse 28, "And we know that in all things God works for the good of those who love him, who have been called according to his purpose." We could take a hope and strengthen that.

Ralph Estep Jr.:
10:14

So to recap today's show, we discussed both conventional and unconventional ways to rebuild credit after a financial crisis. The conventional methods include making timely payments. That is really the most important thing. Keeping credit utilization low, and using secured credit cards, if that works for you. We talked about some unconventional methods as well, including rent reporting services, those self-lender programs and utilizing newer credit scoring models that include utility payments. And in the end, remember this. Rebuilding credit takes time. It takes patience. And it takes a change in your financial habits. That's just a fact.

Ralph Estep Jr.:
10:50

Well, before we wrap up, I want to remind you about tomorrow's show. We'll be discussing the tax impact of gifting someone stock. If you've ever considered given stock as a gift, if you're curious about how the tax implications work, you don't want to miss it.

Ralph Estep Jr.:
11:04

Well now it's time for our call to action. If you found today's episode helpful, I encourage you to visit our website at askralph.com. There you can join our community and share this episode with others who might also be struggling with their credit. Remember when you join our email list, you get a free copy of my book. This is it right here, Mastering Your Finances. It's a $10 value of what you'd pay on Amazon, but it's my gift to you for being part of our community. And listen, please keep those questions coming. The whole point of Ask Ralph is to answer your questions and help you navigate your financial journey from a Christian perspective. So don't be shy, send in those questions.

Ralph Estep Jr.:
11:39

Now, before we go, I want to leave you with this thought. Your financial situation does not determine your worth in God's eyes. Truth is, He loves you unconditionally regardless of your credit score or your bank balance. Trust in his plan for your life and take steps each day to be a good steward of the resources He's given you. So I close with this as I always say, stay financially savvy, and God bless you. You can do this. You can definitely do this.