I want to start out by showing what I believe to be the most important item in a cycle score recovery, which is the installment debt. Part of FICO credit scoring is based on the balance between installment debt and revolving debt. installment debt is debt that has a fixed term on the loan for, for example, an automobile loan. So you purchase a $35,000 vehicle, a 15% interest over a set period of time, let's say 36 months, you then start making payments based on a predetermined dollar amount, a fixed interest rate and fixed period of time revolving debt is different and I will go over that in the next section. It is important to note that although you can use a bank for this process, it is much simpler, less expensive, and more cost effective to use a credit union. You must pay for membership into the credit union ranging from $5 to 20.
$5 Typically, depending upon your location and your employment, credit unions vary and are typically local. If you belong to a company that has a credit union, you could certainly utilize that. Go to the credit union and open a secured savings account in the amount of $340. With online access, in other words, you can get on via the computer. The amount that we're using here is hypothetical. It can be virtually any dollar amount and will be determined by the credit union asked the credit union with the maximum loan term is inserted for that, if possible.
In this example, we will use 60 months or five years. You then borrow back from yourself $300 from the $40 that is left in the account. You will make automatic payments debited from this account back to the credit union a loan from yourself to yourself. In a nutshell, you have just invested $40 to ensure a new positive installment line that now reports perfect credit data to the three major bureaus. And if you're married or have a significant other, both of you can be on this account. This one account can benefit both of you.
Using this example, you will have borrowed $300 at whatever interest rate they charge. In my example, I'm using 3% over a five year term, and your payment will be $5 39 cents. Remember, this money is being taken from the $40 you have left in the account. If you let it run for the entire 36 months, the total money spent by you is $14 and eight cents. The National Credit Union Administration is the US independent Federal agency that supervises and charters federal credit unions as of 2016, in the United States, there were 5737 credit unions, with 103,992 million members comprising 45.4% of the of the economically active population. Where do you locate a credit union that's close to you?
One of the best sites I have found is through www.ncua.gov