Ways to Rebuild Your Credit

 

A great credit score is going to help you in various financial situations in your life. For instance, applying for a mortgage would be easier, and you may get the best terms and interest rates. Paying for insurance and getting a service with little to no deposit also becomes easier when you have a good credit score.

In case you’ve made a few financial mistakes in the past, your credit score may not be as good as you want it to be. However, with a few steps, you can rebuild your credit and avail of all the benefits of having a good credit score.

Let’s take a look at how you may do that.

How To Rebuild Your Credit

Rent Reporting

Did you know that you can help your credit scores with your impeccable rent payments?

You won’t be able to report your rent payments; however, a rent reporting service may do it for you fairly easily!

All you need to do before signing up for a rent reporting service is to find out which credit bureau(s) the service reports to, and what credit scores may utilize those payments.

Paying On Time

 

Paying your bills on time is another factor in rebuilding your credit score. When you’re improving your credit score, avoid late payments at all costs because they may stay on your credit history for almost seven years. Therefore, it gets more difficult to recover from late payment than other financial missteps.

In case a few of your bills have gone to collections, focus on the ones that are still open.

Reducing Credit Utilization Ratio

Another way you may rebuild your credit is by reducing your credit utilization ratio.

A credit utilization ratio is the comparison between the amount of available credit you have and how much of the credit you’re using (the balance). Keeping your credit utilization ratio to a minimum would help in improving your credit.

You may reduce the credit utilization ratio by:

  •         Keeping your credit card balance low
  •         Paying off your credit card debt
  •         Being cautious of closing accounts (closing an account may reduce your available credit, affecting your overall credit utilization ratio)

Using Secured Accounts

Opening a secured account can also help rebuild your credit. Moreover, it may also help in getting approval for traditional loans.

In a secured account, the amount of cash you deposit is utilized as collateral for when you borrow some of the amount for your credit. The usage of secured credit accounts is reported to credit bureaus so that each time you pay your bills on time that credit history helps in improving your credit score.

Becoming Authorized User

You may ask one of your family members or friends to have you as an authorized user on a credit card. You wouldn’t need to access the account but just by being an authorized user, you’d be helping your own credit. Moreover, there are credit cards that put spending limits on authorized users, which may make someone more comfortable adding you as one.

However, one thing you need to be aware of is the fact that in case the account holder doesn’t pay their bills on time, it may hurt your credit score too!

Wrapping Up

In this article, we talked about ways to rebuild your credit.

A good credit score will always help you in the long run, whether you need a mortgage or a utility service subscription.

Among the ways to improve your credit, you may utilize rent reporting, paying your bills on time, reducing the credit utilization ratio on your card, or becoming an authorized user on someone’s credit card.

Posted in: Personal Finance

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