8 Ways to Rebuild Credit
- October 15, 2015
- Posted by: Jeff Gitlen
- Category: Credit Scores
If you have ever tried to apply for a home loan, auto loan, or credit card, you know how important your credit score is. When the financial crisis hit, many people’s credit took a huge nosedive and you may have been one of them.
If you are experiencing problems when you try to be financed for something, your credit score may not be as good as you once thought it was. Before you worry too much, credit scores can be adjusted, and, in fact, they fluctuate on a daily basis.
There are steps you can take to improve your score and help you secure the loans and financing you need later on in life. Below, we will go over eight different ways to jump start credit rebuilding.
1. Scan Your Credit Report for Inaccuracies
One of the first steps you need to take is looking at your credit profile and score. You will need to take some time, sit down, and go through the report with a fine toothcomb. You should look for any errors and then start the process of solving the problems. An error on your credit report can have a negative impact on your score.
2. Make Payment Plans With Creditors
Once you are sure that everything on your credit report is valid debt, you can begin to arrange payment plans with the creditors. Most creditors will work with you to help ensure you can make affordable monthly payments toward your debt. Starting to pay on these negative accounts will help improve your credit score over time.
3. Pay Your Bills on Time
You should start paying all of your bills on time from here on out. Even being a couple days late will have a negative impact on your credit score, so budget wisely and make sure you are sending payments in to the companies prior to your due date.
4. Put Credit Cards in the Backseat
If you can, avoid using your credit cards or opening new accounts. When you keep a zero balance on a credit card, it looks better than paying just the minimum every month. In addition, carrying debt around can have a negative impact on you when you are ready to apply for an automotive or home loan.
5. Keep Good Accounts Open
If you have any loan accounts or credit cards that you are not using, make sure to keep them open and do not close them out. Having an open account with a zero balance will allow you to show that you used the loan or card and then paid it off and have maintained the zero balance.
6. Keep Separate Accounts When You Can
Of course, it is going to be difficult to keep separate accounts when you are married, but if you can, do it. Also, if you divorce, make sure to divide the accounts and only have YOUR name on the account. Your spouse’s credit score can affect you when you continue to hold a joint account. If both of your names appear on an account and the account goes negative, then both of you are responsible for the debt. Making sure to separate the accounts will prevent this from happening and only the responsible party will be held accountable.
7. Stop the Inquiries
If you have many inquiries on your credit report, you will have a lower credit score. Hard inquiries negatively affect your score and can be the difference between an approval and a rejection. A hefty amount of inquiries at one time can be a red flag for companies as well. Do not allow a company to pull your credit report until you are sure you want to work with them.
8. Get a Secured Credit Card
Using a secured credit card can help improve your credit score dramatically. The secured card is designed to allow you to build your credit as you pay the bill. Having a secured card is less of a risk to credit card companies as you place a deposit on the account and your available balance is the amount of your deposit.
Building your credit is important because without good credit, you will have a hard time securing loans, financing, and more. If you find that you are stuck in a debt rut, do your best to work it out and pay down the debt.