A low credit score isn’t ideal, but it’s not the end of the world. Many Americans experience some sort of financial difficulty at some point in their lives. Thankfully, it’s perfectly possible to bounce back and make a successful financial recovery. This article explains a few ways that can help you rebuild your credit score. Because good credit goes a long way in the financial world.
What is a credit score?
A credit score is a three-digit number that predicts how likely you are to repay a loan on time. There are a variety of factors that affect your credit scores, such as your payment history, your total debt, the types of credit accounts you have, their age, recent applications for credit, and past bankruptcies.
Simply put, a credit score measures how well you handle money. You will have a better credit score if you make your payments on time and do not file for bankruptcy.
MyUSAFinance has partnered with credit reporting services to help you monitor your credit score so you can actively start improving it. Learn more about credit reports from the Annual Credit Report.
Why should I rebuild my credit?
Good credit doesn’t just look good; it can also help you attain various important assets. For example, with good credit, you’ll be more likely to get approved for a mortgage or car loan. On top of that, good credit helps you qualify for better interest rates and terms and may decrease your overall insurance costs.
Financial missteps from the past may haunt you in the future and although this history can’t be deleted, it is possible to improve your credit score significantly. Follow these steps to start building positive credit.
Rebuilding your credit score
Looking back at the factors influencing your credit score, it is easy to determine the steps to improve your score. Although not all steps may be feasible to you, it is important to make an effort to try to succeed at as many as you can, in order to rebuild your credit fast.
Review your current credit report
As established earlier in this article, your credit score is affected by various factors. In order to start improving your score, it is important to know your current status. Request your credit report and dive into the details to find out exactly where you should start when it comes to improving your credit score. Also important to note, is that credit reports could contain mistakes. Monitoring your credit report is therefore important to make sure all information is accurate at all times.
Pay bills on time and catch up on overdue payments
This is probably the most obvious tip we have for you, but it is incredibly important to always pay your bills on time, every time. Also don’t forget about past bills that haven’t been paid yet, as many companies will charge extra for overdue payments. If you have missed a payment, you can always call the company and ask them to waive the late fees. It may not always work, but it’s worth a try!
Lower your credit utilization ratio
The credit utilization ratio shows creditors how much credit you have available (think of your credit card limit) and how much you are actually using (your balance). A low credit card utilization ratio, no higher than 30%, is ideal. This can be achieved by paying off your credit card debt and keeping your balance low at all times.
Consider alternative payment methods
Although credit cards can be handy when having to make payments quickly and without having the money in your account yet, it’s always a dangerous game to play. In reality, you end up spending money you don’t have. Alternative payment methods, like a Secured Credit Card, may be a safer option, as you deposit money into an account as collateral. That way you will never end up spending more money than you have.
Request help if you need it
It’s easy to say that you need to pay your bills, but if you don’t have the financial means to do so, this won’t help you. If possible, ask a friend or family member to help out. Even if you have (re)paid all your bills, it may still be wise to turn to a loved one for help to (re)build your score. With an approved user account, you can use your credit score to boost someone else’s credit score and benefit from their credit use.
Use tools to help you view, monitor and improve your scores
Rather than hiring a financial advisor, you can use online tools if you want to increase your credit score without hiring a financial advisor, you can use online tools to do it. By partnering with credit reporting services, MyUSAFinance can help you improve your credit score in a convenient way.
Continue to monitor your credit score
It is important to not only know your credit score but also to understand your credit report. Note where you have improved and where you can make additional improvements in the future. Continue to monitor your progress to learn about your spending and how to improve your financial health.
Make paying off your bills a priority and you’ll see the benefits in no time. Your credit score will thank you for it!
If you need more help rebuilding your credit score, don’t hesitate to reach out to a MyUSAFinance expert for more information and support.
