Restoring your credit to glory is doable but its not easy and requires smart financing, living within your means, and some time.

Smart Financing

Be smart with the money you earn and spend.  First, if you have debt, work to pay it off.  Do the method often called “snowballing your debt”.  How it works is you figure out what you owe and where.  Figure out what your minimum payments total to as well as know the interest rates on all your loans and credit cards.  Next, take as much money as you can possible use to pay a larger payment on your highest APR (annual interest rate) loan.  If possible, pay double that loan’s minimum payment.  Each month you make payments and with work, you will eventually pay off that loan (hopefully within a year).  Once paid off, take the money you were paying on that one card and apply it to your next highest APR loan (double the minimum payment of the previous loan) and work to pay it off.  Rinse and repeat until everything is paid off.

Once everything is paid off, DON’T CANCEL your credit cards (unless you’re too tempted and will get yourself in debt again).    Keeping your credit cards open, even if you don’t use them, will help your credit rating.  If you’ve missed payments or were late you will have bad credit but keeping those credit cards or what not will show creditors you’ve changed your act and will improve your credit rating over time.

Try to use your credit cards each month but instead of carrying the balance and making multiple payments, fully pay off the credit cards.  Treat your credit cards like cash and don’t spend unless you can afford it right now (without spoiling your savings account).

Living Within Your Means

As described in the above paragraph, don’t use loans irresponsibly.  Treat your credit cards like cash and try to pay off any purchases made with your plastic in one or two payments.  Not only will you spend less money on interest, you will rebuild your credit.  At all times, try to put 10% of your income into your savings account–this money is for rainy days.  If possible, instead of a savings account, use a Money Market savings account which will earn you more interest (why pay interest when you can EARN interest?)

Time and Credit Scores

It can take over 5 years for mistakes made in the past to disappear off your credit.  Bad credit is bad, but over time it will adjust and become positive and its important that you remain positive.  Even though debt is a deep hole, its very much possible to get out if you have solid plan.  Don’t get suckered into financing deals you can’t afford.  Be smart, play hard, and you’ll get out of debt, have a large savings account, and a happy future life!

Before applying for bad credit loans, be sure to get your free FICO Credit Score so you can feel empowered and know exactly what lenders see when they run a credit check on you.

Secured Credit Loans

These loans come in several forms. Secured credit cards are the safest way to rebuild a low credit score. Since they are backed by the borrower’s own money or assets, most banks will offer financing to them, however they are typically limited to a few hundred dollars so that they can ensure that they get paid back.

People with the lowest, most desperate credit ratings may not be able to find any other loans with bad credit until they have begun to rebuild with a secured credit card. These people should approach their own bank first to examine policies for getting a card of this type. Wells Fargo, however, is the leading bank to offer, and approve a secured card. Between their fair interest rates and limited fees and the fact that they will take clients with tumultuous credit histories, they are the best starting place.

Where to Find Loans for Bad Credit

Others, whose have credit history that is less troubled, may still be able to seek a loan for the purchase of a new vehicle, a home or even a start-up business. People with scores lower than 620, are considered subprime by most lenders. In such cases, the client can either seek to improve his or her credit (and this may take years) or find a lender who will work with what he or she has. The best subprime lenders are CitiFinancial, CitiMortgage Inc., and PHH Mortgage (formerly known as Cendant Mortgage).

PHH offers their qualifying clients with competitive interest rates on home loans, varying between 11.5% and 14.5%. They have been one of the leading home loans companies in the nation for over twenty years. Because of the large size of the lender, they can take on higher risk clients to finance a home for most credit conditions.

CitiFinancial and CitiMortgage are both subsidiaries of the main CitiGroup. Because the company was so devoted to working with clients in credit crunches, when the economic crisis fleshed out, their way of business was challenged. Fortunately, the struggle subsided and Citi is recovering. They are still among the largest lenders in the nation with trusted portfolios and competitive rates for most people.

Why Choose an Established Financing Company?

An established name is the most important factor in selecting a company to furnish loans for bad credit. While individuals with scores in excess of 700 should be able to find affordable loans with rates as low as 4.7%, clients with rougher histories should expect interest hikes between 7% and 12%. Any company that intends to charge more than 16% on a home loan should be avoided. High interest rates will both serve to make loans impossible to pay off and eventually cripple the holders into a no-pay, no-win situation.

Established names in the industry that offer loans with bad credit can be trusted to offer fairer interest rates. Also, like CitiGroup, if they are challenged by economic crisis, these vast holdings stand a better chance of keeping solvency. If the loan company vanishes, the loan holder has nothing to guarantee his or her assets.

Finally, established financing companies help you avoid companies that use hidden fees, exorbitant interest rates, or even scam you out of your money.

The company offers computer layaway plans to a primarily low-income customer base, and offers Blue Hippo financing for the layaway and to ship a computer to customers after 13 weeks, depending on the payment history of the customer. If the customer has a pay record that is not favorable, then for a $99 sign-up fee and a weekly payment of $36 to $88, the customer can have his computer after a full year – when the computer is completely paid off. This means that on the average, a customer is paying roughly $1,200 for a computer that it takes a whole year to pay for.

To be fair, the BlueHippo plan is not so different from many weekly furniture and appliance rental outlets – except that in those outlets, the customer is allowed to take the merchandise with him right away.

What the two methods of computer ownership have in common is the fact that at the end of the payment period, the customer has paid significantly more for the computer than he would have if he had saved his money over months and bought the computer through traditional channels. What is even more self-defeating is the customers are buying computers that have depreciated and have only 40 GB of hard drive memory. Therefore, the average customer is investing in an inferior product from the very start of a BlueHippo transaction.

What has been seemingly disturbing to the Federal Trade Commission (FTC) and the countless numbers of customers who have leveled complaints is many of the customers have reported never receiving a computer even after they successfully met payment terms. This is the main reason the FTC launched a probe in the first place.

In 2008, after intense FTC scrutiny, Blue Hippo agreed to reimburse customers who had never received their computers. The company was required to place $5 in an account for restitution. This plan would have been an almost perfect solution, had BlueHippo stuck to its part of the deal. After the 2008 exposure, though, the company went back to business and usual and continued to accept payments from customers without sending computers.

It was only after Blue Hippo discovered a second probe to monitor progress in 2009 that the company began to order computers that would go to customers. The FTC had discovered that in the year since the court-ordered injunction, Blue Hippo had only deliver one computer total to one customer out of the 35,000 customers who had entered an agreement for the layaway plan. In that one-year span, the company collected an estimated $15 million.

The FTC filed another injunction, and BlueHippo responded by order more than 4,000 computers – many of which went to customers who had not met the 13-week payment agreement. It looked to the FTC to be quite a reactionary response and not one filled with good will.

Blue Hippo had also failed to submit a required report to the FTC based on the original court order. A judge fined the company $2,500 per day until the report was filed. Blue Hippo submitted a report after five days, but the judge considered it so shoddy, that he placed an additional $5,000 per day fine on the company to submit a proper report.

In November 2009, after a very tarnished reputation, excessive fines and a bank account that was frozen by the FTC, BlueHippo filed for bankruptcy. Company leaders have said they believe the move by the government to freeze assets is unlawful and such a move prevented them from repaying both its 50 to 99 creditors and the customers who had been left with no computers. Blue Hippo has listed its assets as being worth between $10 and $50 million. Across the country, approximately 4,154 complaints have been filed with Better Business Bureau locations in different states.

Despite all the unfavorable publicity, Blue Hippo is still maintaining that it plans to “restructure” the company as quickly as possible. Restructuring could mean several different directions for the company. Its operators could choose to start another company under an entirely different name. It could modify its program offerings to change how participants receive computers.

Blue Hippo could come up with a legitimate complaint and recovery process for its customers to help ensure they get what they have paid for. Such a plan would be nothing less than honorable, if indeed the company is able to salvage its assets and reputation following the injunction and seizure of assets. The world will have to wait and see if this setback is permanent or a necessary way to make sure everyone who pays for a computer receives a computer.