Tips To Building Back Good Credit
Rebuilding your credit can actually be more difficult than starting from scratch. You are trying to show credit lenders that you can make future payments and you are responsible with your finances although you had a slip up in the past. Building credit is like building trust. If you break someone’s trust by lying to them it will take them some time to trust you again and they will want noteworthy actions to prove that you’ve changed. The same goes for building credit, the lenders won’t trust you until you’ve proved that you are able to pay them back with whatever amount of money they are letting you borrow. If you are looking for ways to rebuild your credit, then here are some basic strategies for rebuilding your credit for a successful financial future.
Pay Bills On Time
Now is the most important time to pay bills and existing lines of credit on time. Paying only the minimum is okay if that’s all you can manage. Payment history is the single biggest factor affecting credit score. When you are on track to rebuilding your credit score you cannot afford to make a late payment or miss one. In fact, late payments can actually stay on your credit for up to 7 years, so these take longer to recover from than any other factor of credit.
Credit Utilization Is Important
The amount of credit you use on a specific credit card is called the credit utilization. For example, if you have a credit limit of $4,000 and you used $2,500 of it, you might want to consider lowering that percentage. Experts agree that around 30% is the max you should be using on your credit line. Double check all your current credit cards, and find the one that has the highest credit usage to bring it down. Once your credit issuer reports a lower usage to the bureaus your overall credit score can benefit a lot!
Take Out A Loan To Build Credit
Although it seems counter-intuitive, taking out another personal loan can actually improve your credit score. By taking out a loan, and making all the right moves, financial institutions will see that you are able to manage a larger amount of money and pay everything back in time. You can find personal loan services anywhere you live whether it’s Los Angeles, New York, or if you’re looking for loans in Gallup NM. Typically these companies were created for people who are looking to build credit or need help with taking out a loan. It is important to remember that your payments will be reported to the credit bureaus and any late payment will damage your credit even more.
Obtain A Co-Signer
If you are having trouble taking out a loan or getting access to a line of credit you can get a co-signer to help you. Ask a trustworthy family or friend to help you cosign a loan or credit card. Understand that this is a huge favor, as they are putting their own personal credit reputation on the line for you. Therefore, if you fail to pay on time it also affects them. Use this option if you’re absolutely ready to make that financial commitment and have someone else on the line with you.
Get Help With Your Debt
The debt you currently hold may be the biggest factor affecting your credit score. Don’t be afraid to ask for help from a credit counselor or financial guide. They are here to help you and can assist you with a plan to reduce the amount of debts you have. Another option is debt consolidation, where you consolidate all your debts and pay one single interest rate per month rather than multiple. It will help you manage all your debts better and simplify your life. Bottom line, there is help out there for people who are struggling to manage their debt.
Consider A Secured Account
Opening a secured account, such as a secured credit card will allow you to build positive credit history and can be a valuable tool if you’re struggling to get approved for loans or other lines of credit. With a secured account you deposit cash into an account and then borrow a percentage of that amount as credit.
