Recovering From Bad Credit Requires Diligence, Patience

By Michelle Singletary
Thursday, July 8, 2004

Q I had lots of bad debt that is now finally paid off. But I still can't get credit. My FICO score is 520. I know I'm going to need a new car in the next few months. Where do I go from here?

AWell, you are in a fix. You might try getting what is called a secured credit card. Go to and type in "secured credit cards." With this type of card, you put money into a savings account that you can charge against. Then buy only low-priced items, pay the bill off every month -- on time -- and that can begin to help you regain good credit. As for getting a car, wait as long as you can until you build up your credit; otherwise you will pay a steep interest rate.

My husband and I are expecting our first child. He works. I'm staying home. We received our tax refund and he wants to use it to pay off our credit card. It will pay off most but not all of it. I'm concerned that with one salary, we should just put it in savings. Your suggestions would be greatly appreciated!

Do both. With one salary it's critical that you have money in savings (three to six months' living expenses). But it's also important to get rid of that credit card debt. So take some of the refund and put it in savings if you don't have any. Now, if you do have some savings, pay off the credit card debt.

I am a single mother who lives in a home that is being purchased by the city for urban renewal. The city is offering around $60,000. Can you give me some general guidelines as to how to manage this sum? I want to totally furnish my [new] house and pay off my car and just have the mortgage and house bills to pay for. Good idea?

From your note I see you will be able to get another house. If so, I would use the rest to pay off the car, but I would also build up my savings if I didn't have any, instead of buying furnishings.

I am only about halfway through my [auto] lease and am setting aside money already for the next step. Now, assuming everything looks good (no penalties) -- what would you advise me to do at the end? Buy it outright if I can get less than they say it's worth? Buy it outright if it's been reliable and a good value to me? Start with another car, and only do real financing?

I'm trying not to scream, but you poor dear. Let this be a lesson to everyone else out there. Leasing is bad. In your case, once the lease is over, buy a low-priced, reliable used car. If you can afford the car you are leasing now, then look into it (since it will be in good shape and have low mileage, right?). But compare it with other used cars of the same make and model at a different dealership (or private owner). If your current lease offers the better deal, buy the car you are leasing now. If not, move on, lick your wounds and NEVER, EVER lease again.

My parents are both aging rapidly. Their health is in various levels of decline. They just took out a second mortgage on their house and have maxed out all of their credit cards. Their health care needs are basically provided for as both have been with the government for their entire careers. I am trying to figure out how I can protect myself from inheriting their estate and having to pay off their debt. I'm 30 years old and am not in a financial position where I can support their finances. I don't even know if I need to be concerned about their debt. Does it just go away when they die? Do I need to see an estate attorney, a financial adviser, or both? Are you aware of any books I could use to educate myself on this topic?

You should be worried about your parents, but in this case it's not about you. As an heir, you do not inherit your parents' debts. Their estate -- if there is any money left -- has to pay off any debts, but you don't. Now, if I were you, I would call AARP and talk to someone there about how you can better help your aging parents handle their finances.




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