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One way to rebuild credit after a foreclosure is by obtaining a cash-secured loan or credit card. You take out a loan or line of credit at your bank, using a savings account as collateral. Depending on the bank, you may be able to borrow nearly 100 percent of your account. It does not matter what you use the proceeds for, since the purpose is to start to reestablish your credit.
What You Will Need
Here are a few things you may need for a cash-secured loan or credit card:
- Savings Account
- Completed loan application
- Written statement explaining your credit problems
Step 1 - Open Your Savings Account
Fill out the paperwork at your bank, and deposit the amount you want to borrow into the account.
Step 2 - Meet with a Loan Officer
Right after you have opened your account, ask for a loan officer. Fill out a loan or credit card application, and give the loan officer your savings account information. They will tell you how much they can lend based on your account size.
Step 3 - Close on the Cash-Secured Instrument
Once you have closed, you cannot access the funds in your savings account until the loan is paid in full, or the credit line is canceled.
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