6 Ways to Rebuild Credit

Written By Scott Kessman
Last updated February 22, 2021

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February 22, 2021

Simple. Thrifty. Living.

Knowing you have a good credit score can provide you with great peace of mind. And, of course, having credit in good standing with the three major credit bureaus be very beneficial. This is especially true if you apply for any type of loan, such as a car loan, home mortgage, or even just a personal loan. With a good credit score, you will receive a good interest rate. Good credit also helps when applying for credit cards and even when opening new utility accounts.

However, sometimes various occurrences in life can cause your credit score to suffer. It could be due to some missed payments on utility bills or a mortgage. Or perhaps it was from something more severe, such as having to file for bankruptcy. Regardless of the cause, rebuilding credit can sometimes be difficult, but it is definitely not impossible.

Before you begin with the rebuilding credit tips below, first find out exactly how bad your credit is. You also need to know the full reason as to why you have a lower credit score than you used to.

Request copies of your credit report from Experian, TransUnion, and Equifax. You are allowed to request a free copy once a year. there are other services you can utilize to obtain additional free copies of your credit report throughout the year.

Keep an eye on your credit report on a regular basis, such as every 3-4 months. This can give you a good idea of how certain actions may be affecting your score. It will also alert you to any mistakes on your credit report that might be pulling your score down.

Once you know what you’re working with, you’ll be in a better position for rebuilding credit. Following are some of the best ways to rebuild credit.

Paying your bills on time is one of the most important things you can do to maintain a good credit score. Doing so on a regular basis will help you with rebuilding credit. Pay bills on time, and you’ll begin to see your score steadily rise.

If you are having financial difficulties and can’t pay all your bills, reach out to your creditors. They might be able to set up a payment plan you can work with. Do the same with other institutions, such as utility companies. They often have programs to help individuals that need assistance or time to pay.

You Don’t Want Late Payments Reported

A late payment that is reported to the credit bureaus can negatively impact your score for a while. Additionally, the notification of a late payment can stay on your credit report for a period of 7 years.

Paying the minimum may take longer to pay off various bills, such as credit card bills. But so long as you pay on time, you’ll be engaging in one of the best ways to rebuild credit.

When determining your credit score, the credit bureaus take into account how much credit you actually have available. You may have heard that having too many credit cards can affect your credit score negatively. This can sometimes be true, but having a single maxed-out credit card is worse. It’s better to have several credit cards if there is only a small amount of debt on each.

The Credit Utilization Ratio

An unwritten rule touted by several experts states that you should try never to use up more than 30% of your credit limit on any single card. If you currently have cards with debt higher than that, bring the balance down as quickly as possible. When you’re rebuilding credit, paying down debt will affect your credit score rather quickly.

secured credit card is different from a regular credit card. In order to use it, you must first deposit your own cash into an account. This cash acts as collateral, which means very little risk for the creditor. It’s a good tool for establishing good credit from scratch. It’s also very good for rebuilding credit because continued use will show the credit bureaus that you are using credit responsibly.

If you decide to get a secured card, look for one that reports to all three credit bureaus. This way you can be assured that all the bureaus will receive positive reports of your credit activity.

When you become an authorized user on someone else’s account, it can be one of the best ways to rebuild credit. So long as they maintain good credit habits, you will also benefit from their good credit score. You don’t even have to use the card at all or make any payments.

If your credit score has been damaged significantly, it can be hard to get a new credit card. This will make it more difficult when rebuilding credit. But it might be easier if you can get someone to co-sign with you.

Consideration Before Getting a Co-Signer

Keep in mind that before you have someone co-sign with you, you want to be certain that you’ll be able to practice good credit habits. If you don’t, and your credit continues to suffer, you will negatively impact the co-signer’s credit as well.

A credit-builder loan is a loan that has been specially designed for rebuilding credit. Credit unions often offer these types of loans. To get one, you’ll need to show proof of income so that the credit union can be sure of your ability to repay the loan.

A similar type of loan is a secured loan. Like a secured credit card, this loan is backed by your own money. The main point is to show that you can repay a loan, which will positively affect your credit score over time.

Rebuilding credit can take a good amount of time, depending on how low your score is and what negative marks appear on your credit report. But by following one or more of the ways to rebuild credit described above, you’ll eventually find yourself with a good credit score again. You’ll will also have learned good credit habits that will benefit you in the future.

About the Author

Scott Kessman

I possess a strong 20-year background in marketing, digital marketing, and advertising. However, writing has always been a true passion of mine, and after working in corporate offices for many years, I turned my passion for writing into a full-time job. As a contract content writer for the last 12 years, I can craft engaging and informative content about a wide variety of subjects. I have also written and published two fantasy novels and a collection of short stories.

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