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How to Rebuild Bad Credit in 5 Simple Steps

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  • by Javed Jat|
  • March 1, 2019 |
  • Credit

You can repair your credit in 5 simple steps

The importance of learning how to rebuild your credit shouldn’t be underestimated. Because it can impact your ability to obtain loans, take out a mortgage, get a job, and more, your score makes a serious difference in your life. Improving it can do a great deal to better your financial health.

A low credit score is typically defined as one that is at or below 619 on the FICO score. To qualify for most loans, you should strive to keep your score above 700. In addition to added stress, having a low score can also cost you thousands of dollars each year due to higher interest rates. Even if your credit score hasn’t dipped down into the “bad” range, it’s always a good idea to take steps to increase your score in order to get the best terms on loans.

Achieving and maintaining a high credit score requires a solid credit history and responsible spending habits—but if you’ve made some mistakes along the way and find yourself with a less desirable score, don’t give up. There are many ways to rebuild credit that you can start on right now. We’ll detail five of these below.

Review Your Credit Report

The first step to improving your credit score is understanding the problem. Your credit report will show you why your credit is low and highlight each area in which you need to improve. Each year, you are eligible to receive a free report from each of the three credit bureaus. When reviewing your report, keep an eye out for negative influences like late payments, collections accounts, or public records. In addition to revealing any mistakes you have made regarding your credit, these reports also help you catch early signs of identity theft. If you notice any fraudulent accounts, make sure that you immediately notify the credit bureau to get them removed. The bureau can also place a freeze on your credit to prevent further damage due to fraud.

Catch Up on Overdue Bills

You can’t improve your credit score if you remain behind on your payments. As payment history has the biggest impact on your score, leaving missed payments unpaid will only cause it to drop further. If possible, pay at least the minimum amount necessary on your missed payments. This will change your account’s status from “delinquent” to “paid” on your credit reports. While this status change won’t immediately remove your missed payments from your credit report, it will reflect that you have paid off some debt. If you are unable to catch up on all your missed payments, contact your creditors. By working out a payment plan with them, you may be able to come up with an agreement that will work for both of you.

Avoid Closing Credit Card Accounts

While attempting to increase your credit score, it is important to keep track of your progress. By frequently checking your score, you can stay up to date on which financial actions are improving your score, as well as which actions should be avoided. Knowing the impact of your actions will help you respond to drops in your score quicker. In addition, it is important to make sure that your credit information is accurate. If it isn’t, report harmful errors to the credit bureaus. By checking your score regularly, you can also see when you are qualified for better credit card offers that include preferable interest rates or rewards.

Use A Secured Credit Card

Negative records on your score are like getting bad grades in school. You can’t erase them (they stay on your record for seven to ten years), but you can improve your overall GPA by getting better marks in the future. To help improve your credit score, you should increase the amount of positive information in your payment history by responsibly using a credit card. However, having poor credit can sometimes prevent you from qualifying for a normal credit card.

If this is the case, consider using a secured credit card. These cards are easy to get and are often free to use. To obtain one of these cards, you must open a savings account that can be linked to the card as collateral. This security deposit will serve as your spending limit. Payments that you make using the card will be reported to the credit bureaus each month, so if you avoid maxing out this limit and pay your bills on time, your credit score will increase. In addition, if you demonstrate reliable spending habits, you should be able to transition your secured card into an unsecured card after a few months.

Frequently Check Your Credit Score

While attempting to increase your credit score, it is important to keep track of your progress. By frequently checking your score, you can stay up to date on which financial actions are improving your score, as well as which actions should be avoided. Knowing the impact of your actions will help you respond to drops in your score quicker. In addition, it is important to make sure that your credit information is accurate. If it isn’t, report harmful errors to the credit bureaus. By checking your score regularly, you can also see when you are qualified for better credit card offers that include preferable interest rates or rewards.

By following these steps, you should eventually start to see an increase in your credit score. However, it’s important to remember to stay patient. Improving your score takes time. Don’t expect to see a change in your score after a few days or even a few weeks. It can take anywhere from several months to a few years to increase your score, depending on where it was when you began.

While following these steps will greatly speed up the process, it will usually take at least a year to raise your credit score into the “good” range. In addition, negative history from missed payments is likely to stay on your card for seven to ten years before fully disappearing. But don’t get discouraged—investing time into learning how to rebuild your credit will be well worth it when you are able to achieve better rates, qualify for additional loan options, and save thousands of dollars in interest.

If you find yourself in need of a loan but are still making payments, we offer registration loans in Phoenix, AZ, on your car or truck. While still being able to drive your vehicle, you can pay off the lien on your car title at your own pace without worrying about hidden fees or penalties. Depending on your personal income and equity in your vehicle, you can borrow anything from $150 to $2,500 in as little as 15 minutes. For additional loan assistance, we also have locations in Las Vegas, Henderson, and Reno, Nevada.

How to repair your credit in 5 simple steps

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