Bad credit can make it feel like your options are limited and financial situations are more daunting. Typically, with a good credit score, you have access to better interest rates and terms. If you’re affected by bad credit, don’t give up hope! There are still steps you can take to rebuild your credit score.
First and foremost, it’s important to note what affects your credit score. Payment history, total debt, credit usage, hard inquiries, age of accounts, and public records all play factors in determining your credit score. Things like late/missed payments, large amounts of debt, or filing for bankruptcy could have negatively affected your credit. When trying to repair your credit, it’s helpful to keep these factors in mind moving forward.
Steps to Rebuild Your Credit
1. Pay Your Bills On Time
Payment history and existing debt are the largest factors that affects your credit score. Bills include not only credit bills and loans but also payments for utilities, rent, and so on. It’s important to prioritize accounts that are in good standing as opposed to bills that have already gone to collections. Contacting your creditors to work out a payment plan is also a good option if you can’t pay it all off at once. Another good option to consider is automating payments if you have trouble remembering to pay your bills on time. No matter what, it’s crucial to avoid missing any more payments moving forward if you are trying to rebuild your credit.
2. Avoid Closing Credit Card Accounts
A long credit history actually works in your favor, so you should try to avoid closing any credit card accounts. You should keep your older accounts open to show that you have a credit history. Unless you don’t have a choice and you are required to cancel your account, it is better to keep it open.
3. Get A Secured Credit Card
If you did have to cancel your credit card account, the next best option to take would be to start with secured credit card. The difference between a regular credit card and a secured one is that a secured card requires money upfront as collateral. It does, however, work just like any other credit card. It’s a great option if you cannot qualify for a regular credit card due to poor credit. This is a fast way to build a payment history if you can show that you pay consistently and promptly.
4. Become an Authorized User on a Credit Card
Another option to consider is asking to become an authorized user on someone else’s credit card. There are cards that allow primary users to add authorized users and set spending limits. While this is not a single solution to repairing your credit score, it can help you rebuild your credit score when creditors have closed your other accounts.
5. Apply for A Small Loan or Credit Card
Try applying for a small loan but be careful not to apply for too many or you could negatively impact your credit score. If you have trouble getting approved for a loan or line of credit, try asking a family member or friend to co-sign for you. While this can be tricky and a huge favor to ask of someone, it can definitely help rebuild your credit.
Moving Forward with Credit
Rebuilding you credit will take some time and patience. Unfortunately, there’s no quick, overnight fix for a bad credit score. Only time and diligence can help repair your credit. It can often take years to achieve an excellent credit score, especially if you are rebuilding it from a poor one. Moving forward, it’s vital to start practicing good financial habits like paying on time and setting money aside for a rainy day. As frustrating as it may seem now, it will be well worth it in the end!
If you have any questions or need help through this process, feel free to contact us and we would be more than happy to assist. At Sun West, it’s possible.