7 East Steps to Rebuild Your Credit Score

If you find yourself dealing with a poor credit score, it is not the end of the world. There are a number of steps you can take to rebuild and improve your credit score. Though rebuilding your credit won’t happen overnight, it can certainly be done if the correct measures are taken.

HOW ARE CREDIT SCORES CALCULATED?

Your credit report is a compilation of data about your financial behavior. This information is gathered from public records, lenders, and credit collection agencies. This is then used to calculate a three-digit credit score, which is based on your credit report’s information on:

• Payment history
• Total amount of debts owed
• Credit utilization rate
• Length of credit history
• Types of credit
• Public records data (record of bankruptcy declaration, tax liens, or civil judgments)
• Number of inquiries on credit report

HOW CAN YOU IMPROVE YOUR CREDIT SCORE?

Large amounts of debt and late payments negatively impact your credit score. If you are in this situation, you can rebuild your credit score through seven easy steps.

CHECK YOUR CREDIT REPORT FOR POSSIBLE ERRORS AND DISCREPANCIES

Check your credit report for inaccuracies and signs of fraud. 

DEVELOP A REALISTIC BUDGET, AND STICK TO IT

People often fall into the debt trap due to poor financial habits. Create a budget, and make sure you stick to it.

MAINTAIN GOOD CREDIT HABITS

Start by developing healthy financial habits. Maintain a good, consistent credit history by ensuring you pay your bills on time, avoid going beyond your credit limit, and build good spending habits.

PAY DEBTS ON TIME

Late payments negatively affect your credit score. To keep your score in good shape, pay your debt on time, all the time. Make paying down your debt your top priority. Keep open older accounts. Don’t close your old accounts unless they’re costing you more in fees. Your old accounts can help you achieve a longer credit history, which is boost your credit score.

SET UP A STRATEGIC PAYMENT PLAN

Do your best to reduce and pay off your debt. Set up automatic payments so you won’t forget your payment obligations. If you have ways to boost your income, do so.

USE A SINGLE CREDIT CARD

Stop applying for multiple unnecessary credit cards. Sticking to one credit card can help you to build a positive credit history.

Your credit report is a key to your financial health. On your credit report, a good credit score can help you get better loan payment terms and lower interest rates. If you have a poor credit score, you may have trouble securing certain types of loans, and even have trouble leasing an apartment or landing a certain job. To maintain your financial health, make sure you maintain good credit.

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