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How to Rebuild Your Credit
21 Sep 2018

How to Rebuild Your Credit: Your Ultimate, Specific and Comprehensive Guide

There are almost 1 billion Visa credit cards in circulation worldwide. Over a quarter of those cards are sitting in American pockets.

That massive amount of credit cards consumers use on a daily basis is extremely telling of how much credit means to our lives. Unfortunately, with growing demand for credit has also come a huge amount of collective debt which has amassed to 1.3 trillion dollars.

People’s inability to pay back that debt has given way to falling credit scores and with bad credit comes a whole host of other issues. These include an inability to borrow money, issues with purchasing cars, homes or even getting approval for an apartment lease.

If the above chain sounds similar to the situation you’re living through, you may be wondering how to rebuild your credit.

Below, our team goes in-depth into better understanding your credit score and how to give it a boost!

Understanding Where Your Credit Stands

In order to improve your credit, you first need to have a specific idea of where it currently sits.

Credit scores can range from 300 – 850. Scores that are in the range of 300 – 579 are considered poor.

Before you begin using the how to rebuild your credit tips we are going to share with you below, we recommend first checking your credit score. To do this, request a free credit report from the three primary credit bureaus. You can also use credit score checking tools like the ones offered by popular services like Mint.

The Core Factors That Effect Your Credit

There are 5 primary factors that will have either a positive or negative impact on your credit. You will find that all of our specific how to rebuild your credit suggestions work in some way to pull these factors in your favor.

The 5 primary credit impact factors are as follows:

Payment History

Your history of making payments in a timely fashion on your debt. The more timely payments you’ve made, the more this factor will support your score.

Credit Usage Percentage

The percentage of your available credit you’ve used. The lower your borrowing percentage, the better your score will be.

Credit History

How long you’ve actively been borrowing money. The longer history you have utilizing credit, the more support your score will get.

Credit Portfolio

How many different credit types you’re using. For example, a borrower that has just credit cards would get less support from this factor than a borrower that has credit cards, a mortgage, and a car loan.

Number of Inquiries

Every time a lender or other party who needs to know your credit checks your score, your score will go down slightly. There are two types of credit checks, soft and hard. Soft checks do negligible damage to your score while hard checks stay on your report for longer.

Specific How to Rebuild Your Credit Strategies

Now that you understand your credit score and the underlying factors that can improve or harm it, it’s time to get specific. Below, our team has compiled 9 strategies you can leverage to help you start rebuilding your credit today!

Start Living Within Your Means

This is always the first piece of how to rebuild your credit advice we give to people. At the end of the day, bad credit almost always stems from less than optimal money management. Mismanaging money tends to have its roots in overextending yourself financially.

To start on the road to stellar credit, our recommendation is to first cut excessive expenditures out of your life.

Ask yourself, what things do you spend money on each month that are a luxury? Examples could be things like eating out every day, having a premium cable package, enjoying a morning cup of Starbucks coffee, etc.

The more you can reign in these unnecessary expenses, the more money you’ll have to start putting towards paying down your current debt and making timely payments on future debt. That will do wonders for improving your credit situation.

Set Up Auto-Payments on Your Credit

Another common factor when it comes to people needing to rehabilitate their credit is disorganization. Let’s face it, we all have a tremendous amount to manage in our daily lives. This volume of things often leads to stuff falling through the cracks and when that “stuff” is your credit payments, you’re going to take a hit.

To make sure your score isn’t falling due to simply forgetting when things are due, set up automatic payments on all of your credit accounts.

Automatic payments are typically easy to set up online through your creditor’s website or on the phone. They allow you to specify if you’d like to pay down your monthly balance in full or pay your minimum amount due.

With automatic payments in place, you’ll consistently rack up positive marks on your payment history and your credit score will begin to flourish.

Prioritize Your Payments

If you’re managing multiple credit streams, you’ll want to prioritize which you’re going to want to pay off the quickest. Your pay-off focus should go towards whichever card, loan, etc. is charging you the most interest.

That doesn’t mean that you should neglect paying for your lower interest credit/loan products.

Our recommendation is to always keep up with at least the minimum payment due on all of your borrowed money and allocate additional resources to the products that are costing you the most.

You’ll find that by prioritizing your payments, you’ll save on interest and fees.

Keep Old Accounts Open

It can be tempting to close credit cards as you pay them off. While it’s generally not harmful to do this, you’ll want to be selective in which accounts you close and which you keep open.

Remember, the longer account history you have, the better your credit score will be. If you close your oldest credit card account, that history will be lost and you will effectively do more harm than good to your score.

For that reason, always try to keep your oldest cards open so long as they do not carry annual fees. Doing so will help you on your how to rebuild your credit journey.

Fix Credit Reporting Errors

Did you know that 1 out of every 5 people has an error on their credit report? These errors can make you look significantly riskier to lenders than you really are.

It’s extremely important to regularly request and review your credit report to flag these errors. If you see any on your report, you can get them cleared up by contacting the credit agency (or agencies) where the error exists and having them make corrections.

For more information on correcting reporting errors, refer to this guide published by the FTC.

Limit Credit Checks

While having your credit checked is a reality of life, limiting the number of inquiries you get will help your score. This is especially true when it comes to hard credit checks.

Hard credit checks can damage your score significantly and can take up to two years to fall off of your report.

When you need to get your credit checked, always ask if the inquiry will be hard or soft. If it’s hard, consider whether or not the check is worth it.

Negotiate with Your Creditors

The lending industry is very competitive. Because of that, most creditors will give you a lot of leeway if it means keeping you with them as opposed to another lender. That’s why negotiating is such a powerful how to rebuild your credit strategy.

To help your money go further when paying down debt, call up your lender and see if you can get your interest rate reduced or your fees waived. If they won’t budge let them know that you’re considering refinancing your debt with another lender.

Chances are your lender will help you reduce your payment burden.

If Needed, Consolidate Your Debt

Debt consolidation is a double-edged sword when it comes to how to rebuild your credit. When you consolidate your debt, you move all of your debt from more costly loan products to a single, low interest, low fee lender.

This will reduce your payment burden and increase the ease in which you make payments. Unfortunately, this may also decrease your credit accounts which can boost the percentage of credit you’ve borrowed against.

For that reason, think thoroughly on the impact debt consolidation could have on your life and if it’s right for you.

how to rebuild your creditWrapping Up How to Rebuild Your Credit

If you’re like many Americans, you may be struggling with picking yourself up out of a bad credit range. Our recommendation is to take to heart the how to rebuild your credit tips we’ve listed above to give you a running start on your credit building journey!

If you are struggling with bad credit and need money now, know that you have options. Whether it’s applying for a credit card specifically for those rehabilitating their credit or looking for short-term loans, our team can help!

Use our loan finding tools to locate lenders who can get you money in as quickly as a few hours. Or, find a credit card that’s right for you now!