Here’s something that holds true for everyone: a solid credit score is required to qualify for loans, credit cards, and more. Sadly, it takes just a few things to ruin your credit score. A late payment here, a missed payment there, and your credit score can immediately slip below the acceptable number. And the worse your credit becomes, the more difficult it becomes to get approved for things you may need, like loans for home construction. Even your insurance rates may be affected by your bad credit score.
It takes many years to restore your credit score fully. But don’t worry – it’s not impossible. While you won’t be able to instantly remove the negative items from your credit report, the earlier you take steps to rebuild your credit, the earlier there will be improvements. Here are some things you can do to rebuild your credit.
Stop buying things with your credit card.
One major source of low credit scores is credit card debt because it’s easy to just use your credit card at the spur of the moment. Remove your cards from your wallet and put them somewhere secure. Furthermore, erase all saved credit card info from sites you used to buy from so your cards don’t get any additional debt. Consider utilizing the old-school cash envelope budgeting approach. Paying cash for everything makes you feel it more, resulting in you doing less of it. If you really have to buy something online, use a debit card rather than a credit card, so you’re just limited to the funds in your account.
Look over your credit report.
Equifax, Experian, and Transunion, the three major credit agencies, all allow you to see your credit report once a year without impacting your credit score. Once you have the credit report, examine every account that appears on your credit record, whether open or closed. Here are some things you should watch out for:
- If there are incorrect account numbers, names, or addresses on your records
- You have accounts that have been closed but are still advertised as active
- Credit card accounts are credited to you but are not in your name, such as debts belonging to an ex-spouse
- There are multiple appearances of a single account
- There is a balance or credit limit on an open account that is incorrect
- Payment information is inaccurate, such as an on-time payment listed as late
Take steps to correct any errors so that your credit score will not be impacted negatively.
Examine your budget and make the necessary cuts
Do you know what you’re spending on? Check out everything that is costing you money and see what are the things you can cut back on. Start again with a new budget to maximize your savings rate. Utilize four weeks’ income as your monthly revenue for accounting purposes. It’s a good idea to start with your target savings rate as the first “expense” in your budget. After that, add other costs so that your budget is built around your savings rate. Remember, savings should not be a last-minute decision based on what’s leftover at the end of the month.
Get a secured credit card.
If you have poor or no credit, you’ll need a credit account to show that you’ve made on-time payments in the past. Secured credit cards are a low-cost and convenient way to accomplish this. How does a secured credit card work?
The secured credit card functions similarly to a regular credit card and reports to the credit bureaus as usual. Your cash is held in trust by your credit card provider as collateral. Therefore, the card company is protected against default, which is needed due to your shaky credit history. The good news is that these training wheels do not have to be used indefinitely. You can then move on to a regular credit card once your credit history has improved.
Take out a credit-building loan.
Credit-builder loans, a relatively new addition to the realm of personal finance, report to credit agencies in the same way that traditional installment loans do. Instead of borrowing from a lender, you effectively lend money to yourself, which the “lender” holds in an escrow account for you. You select a loan period and amount when you open an account with the lender. You then agree to make regular monthly payments to the lender for the loan duration, which the lender will hold in an escrow account for you. You get your money back after the loan term, minus a modest fee that the lender gets for setting up your escrow account and reporting your on-time payments each month. Some credit-builder lenders allow you to set up automatic monthly payments to make it even easier to build credit by establishing a solid payment history.
Pay off any unsecured debts you have.
Most unsecured debts have high interest rates. So, if you have any loans, whether school loans or other debts that aren’t secured by a home or car, pay them off as soon as possible. Paying off these debts improves your credit by lowering your balance ratios. It also helps to improve your overall financial situation by eliminating high-interest loans.
Try asking companies you owe money to for conditions or terms if you find that you can’t pay for your loans immediately. Many companies have set up programs to help you cut your payments or postpone them, especially now because of the COVID-19 pandemic.
Make all of your payments on time.
Yes, it’s easier said than done, but don’t be fooled; timely payments are essential. Late payments are recorded on your account for seven years. Their impact on your credit score fades with time, but remember that your payment history accounts for 35% of your credit score!
Set up automatic payments if you’re able to pay on time but have been late because you have a lot of other things on your to-do list, or you’re simply forgetful.
Get help from a credit repair service.
If you’re having a hard time doing things by yourself, maybe it’s time to employ the services of a credit repair service in Anderson, SC. Look no further than us at Next Level Credit. We offer personalized options that we will fit to your exact repair needs. While repair is happening, we will have a case analyst and case advisor working personally with you throughout the entire process. You will get 24/7 access to your case status and will always have updated information.
We offer free consultations – contact us now and let us help you repair your credit.
Above all else, don’t stray from your goal.
Don’t sabotage your stability once you’ve regained it. It may take a few months for your credit score to improve and a few years to get back on your feet, depending on how bad your credit mistakes are, but don’t feel bad. Just start with the basics and go slowly and gradually. Avoid overspending, don’t abuse your credit, and save aside money to cover any future shortfalls.
As long as you’re taking steps, there will be improvements. And by all means, guard against developing further negative financial habits.