Personal loan with collateral for bad credit

It's like a scheme to bilk yourself. You pay your rent with a cash advance from one credit card. You make your minimum payment on that card by taking a cash advance from another card. Finally, you're maxed out on all your credit lines and bugging out, with your credit record shot. Every time you are late with a payment, fail to make the minimum due, or apply for more credit, a new entry appears on your credit report.

Or even if you think your record is spotless, your credit history could be bad through no fault of your own. You had a shady roommate who skipped town without paying off a huge phone bill, and the phone was in your name. Or your credit report could be riddled with mistakes.

Repairing a bad credit history can take years. The only way to fix your credit is to improve it by paying your bills on time or to set the record straight with the credit agencies. You can get a copy of your credit report by calling each of the major agencies: Equifax (800-685-1111), Experian (800-682-7654), and Trans Union (800-888-4213). You will be charged $8 for a report in most states.

Errors. You can dispute inaccurate information, but complaining might not help. It's not unusual for errors to be removed and then reappear a few months later, though a new federal law requires that credit bureaus establish a system to prevent reinsertion of errors.

Maybe the information is accurate but dated. If you once were delinquent on an account but now pay on time, Gerri Detweiler, author of The Ultimate Credit Handbook (Plume, 1997; $12.95), advises you to contact the creditor and ask that the old information be deleted. If you can offer a convincing explanation of both your delinquency and your improved credit habits, you may be able to get them to drop the damning evidence.

What if you hold accounts that are currently delinquent? You might be able to negotiate with the creditor to waive interest charges for a few months or lower your rate for a month. If your current credit crunch is the result of a job loss, a divorce, or an illness, you should send a letter to the credit bureaus explaining your temporary setback and asking them to attach the explanation to your credit file. That way future creditors will be able to read your letter and perhaps have a better understanding of your situation. A new booklet, "Debt Consolidation 101: Strategies for Saving Money & Paying Off Your Debts Faster" ($4.50 postpaid, Good Advice Press, PO Box 78, Elizaville, NY 12523), coauthored by Detweiler, provides other tips.

To build new credit, you'll have to prove you are a good risk. If you're lucky enough to retain a bank card--Visa, MasterCard, or Discover--use it modestly, pay it off each month, and check to be sure that the credit bureaus are notified. But if all your accounts were closed, there's still a way to get back on track--with a secured bank card. These cards offer people who can't get a standard Visa or MasterCard the chance to start over. Secured cards typically have higher annual fees and interest charges than unsecured cards and require you to deposit reserve funds in a savings account as collateral.

Steer clear of credit repair services, or so-called credit doctors, which advertise their services on the Web, in newspapers, and in magazines. They typically promise to rid your credit report of all the bad information for a fee of $500 or so, paid upfront. They can't do anything you couldn't do yourself; with them or without them, bad marks will stay on your credit report for seven years. A free booklet published by the Federal Trade Commission, "Getting Back in the Black," explains credit repair. You can get a copy by writing to the FTC's Public Reference Branch, Room 130, Sixth Street and Pennsylvania Avenue, N.W., Washington, DC 20580.

As a last resort, you can do what more than 1.3 million cash-strapped consume have done in the past year--file for bankruptcy. Under Chapter 7, or straight bankruptcy, you fill out a form and file it with a fee of about $160 at U.S. Bankruptcy Court. A judge then decides how to divide your assets among your creditors. But some debts can't be erased by Chapter 7, including most student loans, child-support obligations, and back taxes. While bankruptcy has lost some of its stigma, you'll live with it as a black mark on your credit report for a decade to come.