How to Help Rebuild Your Credit

How you manage various types of credit is documented throughout your life span which makes your credit score. That credit score determines your ability to borrow money from lenders or banks.

Rather than starting from scratch, rebuilding your credit can be a tougher choice. Here you are trying to show the lenders that you can keep your part of the promise and make the payments timely. You are trying to make your lender trust you with the payments. However, before you rebuild your credit, you need to know where your credit score stands, it might not be that bad.

A few pointers which can help you get your credit back on track

Improvising the credit score can be a very slow process, but it will help in your financial health growth.

Credit report – First and the most important step while planning to rebuild your finances is to have an accurate view of your credits. Request a free credit report so that all the lenders can have a clear view of your finances. If you find any error in them, you can even file a dispute to recheck the finances.

Pay the bills on time – Paying your balance on time will not only keep the balance low and avoid any late fees but will also make a good impression in front of the lenders regarding managing your finances.

To show your responsible nature towards your finances, you can carry a balance with credit utilization of around 30% to 50% or less.

Consolidate your balance – Debt consolidation is an act of borrowing a single loan to pay off multiple debts. New loans can include lower-interest credit cards and home equity loans, etc. Lower interest rates and lower monthly payments are the benefits of consolidating the balance.

Credit monitoring services – Some credit reporting bureaus, like CIBIL, offer to monitor your credit. They notify you if there is any change in your credit score or the information in your report. This can help you in being aware of all your finances.

Maintain active credit account – This is a very big factor in credit score. Your lender would like to see a proven borrowing and repayment track on your track record. Also creating a new account will only have a lower credit score as there will be no length to your history.

Avoid negative listing – Try to fully repay your debts to avoid the payment default effects, these can linger in your credit reports for at least 7 years to 10 years. This can pull down your credit score by a lot and landers can see it for a long time.

Correct late payments and collection accounts – Suppose you have one delinquency with the card provider, and you pay your bill in full, some agencies will be willing to remove a collection account from your credit card. However, some may refuse but there is no harm in trying.

Credit mix problem – These types of situations won’t have a major impact only minor but the types of accounts you open or want to open can impact your credit score. If you find that your credit report is only one dimensional, i.e., only credit cards, then applying for another type of account might benefit you. If you do open a new account, manage it well.

New credit problems – Seeking new credit too often is not good for your credit score. Whenever you apply for new credit, the lender will sure look at your credit history called a hard credit inquiry which can surely damage your credit score. Credit inquiries remain in your credit card report for at least 2 years and affect the score for 1 year. The best way to help you score here is to avoid taking new credits.

Keep some credit available – As stated earlier as well, if you are working to Rebuild your credit score then you need to keep some of the credit available. This is also known as low credit utilization and is very important which indicates you are managing your finances.
How long it might take to rebuild credit?

Rebuilding credit is a slow process and can take time. Na just how long it is going to take a particular user depends upon the circumstances. Your current score highly affects the whole process and many other things like history and delinquencies play a very important part in how much time it will take you to rebuild your credit.

Read More: Can Anyone Check Your Credit Without Your Permission?

Bottom Line

Rebuilding a credit card is not a quick task. It will need patience and time for the credit to come back to its normal. However, exactly how much depends on what methods you follow and the circumstances.

You need to make sure that you have all the necessary information regarding how to rebuild your credit. There are many Credit Rebuilding programs available in the market that can help you through this journey. These programs can come in handy to Rebuild your credit score.