If you’ve found yourself with less than perfect credit, working to rebuild your credit score will take time. Fixing bad credit is much harder than creating it and learning how to improve a bad credit score takes time. Negative credit report information will harm your chance of getting approved for loans and establishing new lines of credit.
Here are three wise tips to help you rebuild your credit.
Pay your bills on time every month
The most important step to rebuilding your credit is to pay your bills before their due date. Credit cards, mortgages, car loans, personal loans, medical bills, or any other financial obligation you have that can be reported to your credit. Paying bills on time shows the credit agencies you’re being responsible and will raise your score over time.
Thirty-five percent of your credit score is your payment history, so every late payment is damaging.
Reducing Debt
Once you have begun paying bills on time, reducing your debt is another an important step to rebuilding your credit. Paying down balances on credit cards, auto loans or any other credit line will help improve your credit score.
If you have collection accounts, get these paid for! If you can’t pay the entire balance, set up a payment arrangement to get it paid for. This will show the collection as paid on your credit and avoid it being sold to another lender (who will also report it to your credit).
When all credit is used to the maximum, it decreases your credit score. As you begin paying debt down, your score will raise as it shows that you can handle credit responsibly.
Use credit cards responsibly
As you begin paying your bills on time and reducing debts, applying for a new credit card can boost your credit score. Using a credit card and paying payments timely help you establish a positive payment history. Keeping all credit card balances below 30% of the credit limit is vital for improving your score.
If you don’t currently have any credit cards, apply for one. Be careful not to apply for to many cards, as this can lower your score. If you get approved for an unsecured credit card, use it one time for a small amount and make timely payments over a few months. Do not charge more than you can afford to pay back over a few months! This will establish a good payment history that creditors look for.