Ten Steps To Rebuild Your Credit
1) Several inaccuracies in your credit history could cause your credit score to drop significantly. In order to repair your credit long term, make sure that the data inside of your credit report is accurate. Make an effort to correct any errors found in your credit history by requesting copies from Experian, Equifax, and TransUnion. A dispute can be filed online, by mail or by phone depending on which agency is contacted. Additionally, be sure to make copies of your dispute documents before sending them to a credit bureau.
2) Try to catch up making payments on your accounts as much as possible. If making payments is an issue, communicate with your lenders to arrange a payment plan that is more feasible under your circumstances or contact a reputable third party to negotiate the amount of your payments for you.
3) Try to make payments on time, especially on major bills such as a mortgage, car note, rent or utility payment. The pattern of how you make your payments is one of the most crucial areas of how your credit score is tallied. Consistent payments are the key to getting your credit score higher. One way to make sure payments are made on time is to schedule an automatic draft for your bills.
4) A very simple way to establish a credit history is to apply for a secured line of credit through your bank. The way a secured credit card works is the consumer deposits a set amount of money toward the card that typically matches the credit limit. The bank reduces their fund recovery risk since a special savings account is set up just in case the consumer fails to make monthly payments on their card. In some instances, a co-signer is needed in order to qualify for a secured credit card. As a tip, take out a secured credit card from a credit union.
5) Repairing your credit long term involves gradually upgrading to the next level of credit worthiness. Take time to establish a good payment history, and then apply for more credit, ideally that’s unsecured. Apply for credit cards that are easier to get approved for and make sure to make your payments in a timely manner. After waiting for an additional half a year to a year, you may be in a better position to apply for a regular bank credit card.
6) Space out how many credit cards you apply for within a year. Also, be mindful of keeping your debt down as much as possible and leave credit accounts open instead of closing them. Closing credit cards accounts can actually hurt your credit score since this cuts off access to your credit history with the lender. Before chucking a card that has less than favorable options (e.g., yearly fee or high interest rate) consider requesting a different type of card from the creditor.
7) Making too many credit inquiries within the same year can significantly pull down your credit score. Timing when to apply for credit is essential in order to repair your credit over a long period of time. Generally, making a single credit search doesn’t raise the red flag as much as when making multiple inquiries.
8) Many consumers’ credit score is damaged because of someone they know or don’t know applying for credit under their name. Set up a program that will protect your credit card from identity theft. Requesting each credit bureau put a security freeze on your credit can help prevent someone from opening a new line of credit in your name until you unfreeze it. This action is often seen as a more practical than applying for a fraud alert or a less comprehensive identity theft protection service. Get a free copy of your credit score along with other online resources to track and monitor your score.
9) Depending on the credit health of a primary credit account holder, you may also be able to improve your score by being added to their account as an authorized user. Repairing your credit history could also involve applying for credit cards that are pre-approved. This allows you to receive credit without making an inquiry. If your collection debts are less than two years old, pay what you owe directly to the creditor, instead of the collection agency. Making these type of credit decisions, especially after filing for bankruptcy will help to keep your credit score from being harmed any further. For example, Chapter 7 bankruptcy is removed from public records 10 years from the filing date since no repayment of debt is required. In contrast, if you’ve filed for Chapter 13 bankruptcy, it will only take 7 years to remove your debt from public record since a percentage of what you owe is paid back under your discharge plan.
10) You may also want to consider combining and paying all of your bills into one monthly payment. Credit card consolidation or debt consolidation is a loan strategy designed to pay off multiple miscellaneous debts or credit card balances at a lower interest rate with the idea of paying them off faster. It also trains you to make payments when they’re due. However, debt consolidation requires that you be fully educated about the fine print of a lower interest rate loan.
Some debt consolidation companies appear to offer debt relief to their customers, when in actuality, make them pay even more interest during the period of the loan based on its specific terms. Before you lock yourself into a debt consolidation agreement, it’s important to seek debt consolidation advice from a reputable financial company. This allows you to receive information about the pros and cons of debt consolidation and see if this strategy will benefit you long term. A reputable debt consolidation company will also discuss alternative debt solutions to debt consolidation such as debt management or debt settlement.