What If You Can't Pay Your Mortgage

For more information on avoiding foreclosure, including contact numbers for lenders, check the Federal Housing Administration's Web site.

I was discharged on my debts in bankruptcy but had a car loan which was my major bill that was always paid on time for two years. Now I need to rebuild my score. I was told that getting a secured credit card that reports to credit bureaus was a good start. Do you agree?
— Mary, Hephzibah, Ga.

Yes. One of the most important parts of a good credit record is a solid payment history on more than one loan or credit card. That can be a problem if you're just starting out — or your credit history is so bad no one will give you a loan or a credit card.

A secured card is an account that includes a deposit you make up front, usually equal to your credit limit, which should pay you interest like a savings account. That may sound like the debit card you use to get money from your checking account, but there are a few important differences.

With a debit card, the money to pay the transaction is taken out of your account immediately. With a secured credit card, the lender extends you credit and you're billed at the end of the month — just like an unsecured card. But because you've paid the lender a deposit up front, there's less risk you won't pay off your balance.

You'll also owe interest on outstanding balances — just like an unsecured credit card. And the terms vary widely from one lender to the next. Shop around: Some of these cards have such high fees they'll take a big bite out of your deposit before you start using the card. Watch out for other onerous terms — like a mandatory a payment "insurance" policy, for example.

You may also want to try opening a credit card with a retailer. Some stores are quicker to give you a credit card to promote their brand; the hope is you'll to shop more at their stores and they'll make a little more money by charging interest on everything you buy.

Of course, signing up for more cards isn't a good idea if you run balances on them — which will soon get you back on the bad credit track you're trying to get avoid. So sign up one at a time, see how it goes and don't take on more cards until you've begun building that solid track record.

For more on how to get and keep a good credit store, check out the Web site for Fair Isaac Corporation, the "FICO" behind the scores.

© 2008