How to Rebuild Credit

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A good credit score is like a financial passport—it gets you access to the best loan rates and credit card offers. 

If you’re looking to rebuild credit, here’s how to get started.

Intro to Credit Scores

Your credit score is a number between 300 and 850 lenders use to gauge your financial history. 

The higher your score, the more reliable you appear, and the less risk you pose.

Credit scores are affecteed by several things:

• Timely bill payment

 

• How much credit you're using

 

• How long you've had credit

 

• How many credit accounts you have

 

• What kinds of credit you have (mortgage, student loans)

 

• How frequently you apply for new credit

 

• Your total debt

How to Check Your Credit Score

There are three major credit bureaus: Equifax, Experian, and TransUnion. They will each provide a free copy of your full credit report to you once per year. 

File a request at annualcreditreport.com or call 1-877-322-8228 to get started.

Your bank or credit card company may provide your score for free using FICO or VantageScore.

What's a Good Credit Score?

On a 350 to 850 range, anything over 700 is considered good. 

Between 600 and 750 is average and above 800 is considered exceptional.

What Leads to a "Poor" Credit Score

A credit score below 600 is considered poor. 

Late payments, large amounts of debt, and maxed-out cards are the most common ways to get a low credit score.

7 Ways to Rebuild Credit

If you’re credit score is on the lower end, don’t worry you can rebuild it

Start good financial habits to set yourself up for sucess., 

Negative marks on your report drop off after 7 to 10 years.

Pay your bills on time

Consistent, on-time payments are an easy way to rebuild credit. 

Even routine payments on small recurring expenses like a utility bill help boost your credit score. 

Set up automatic payments to ensure you never pay late again.

Take care of overdue payments

If you have overdue bills, pay these first, and set up a strategy to pay on time in the future. 

Look through your credit report for any missed payments. Check to see if anything went to collections. 

If you cannot pay the total you owe, pay the minimum to move your status from delinquent to paid.

Keep your credit utilization ratio low

Your credit utilization ratio is how much credit you're using versus out of how much you have available. Keeping your ratio under 30% improves your credit score. 

Keep credit lines open

The length of your credit history is an important factor in your credit score. 

Active older accounts look betterl than starting over with a new line of credit. 

For less-used credit cards, keep the account active with small recurring charges paid automatically.

Partner with an authorized user

An authorized user is anyone who is able to use a line of credit, like a credit card. 

If a family member or friend lists you as an authorized user, your credit can get a boost—even if you never spend a dime of that account.

Don’t request new credit

When a lender pulls your file from a credit bureau, it’s called a hard inquiry. Hard inquiries lower your credit score slightly.

Requesting new credit lines too often can really hurt your credit, so hold off if you can.

Try a secured credit card

A secured credit card is a type of account designed for people with low credit scores. 

For this type of credit card, you pre-pay as a deposit. If you can’t make a regular payment, your lender collects payment from your deposit—a guaranteed way to build credit, even if you miss a billing date.

Rebuilding your credit history takes effort and patience. 

You can grow your score from below 600 to the 700-800 range, but it will usually take a few years. 

Good habits and consistency are key to help you rebuild your credit.

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