4 Proven Ways To Rebuild Your Credit

Restoring the health of your credit history can be quite a difficult task and even trickier than building one from scratch. It essentially starts with taking control of your finances, debts, spending habits, and repayment patterns. However, the real challenge is to convince lenders and issuers of credit cards that you are going to ensure that all future payments will be completed by you as agreed.

Before you begin to rebuild your credit footprint to reflect a more positive history, it’s important to know where your starting point is. There are several online financial services websites where you can check your credit score and understand your credit rating for free. Once you know where you stand, you can start by setting minor, achievable goals for yourself.

Avoid having too many active credit accounts

One of the biggest mistakes you can make while trying to get your finances back in control and restore the health of your credit report is opening multiple new credit accounts within a short span. This is often used as a way to divert the funds, which have just been made available to you, toward repaying existing debts. Your goal at this point should be to consolidate your debts instead of spreading them out even more across multiple accounts. Remember, this is always going to be a temporary solution, which may even cause you to end up in a vicious debt trap. 

Start and maintain stable credit habits 

Contrary to popular belief, having and using a credit card is a great way to rebuild your credit rating. If you are an active credit user in the habit of paying with your credit card, make it a point to pay off your outstanding balance in full at the end of the billing cycle. Paying off your outstanding in full will also ensure that you do not get too close to your credit limit, which also reflects badly on your credit report.

You must also ensure that your repayment never crosses the due date. If your paycheck comes later than your due date in a month, you can consider speaking to the customer relationship manager of the financial institution you have taken the card from to reset your due date to a more favorable time for you. 

Become an authorized user

In this, all you have to do is ask someone close to you to add you as an authorized user on a credit card. Just from getting on the account, your credit score benefits. For authorized users, a few cards allow primary cardholders to set spending caps, which may help the account holder feel more at ease including you. You could also ask someone to add you without actually giving you a card or card number.

However, you must keep in mind that being an authorized user on someone else’s card can hurt your credit score if the person has botched repayment patterns. To avoid the same, make sure that you ask someone with good credit habits.

Analyze your credit report 

One of the key steps to restoring your credit health is by means of developing an analytical attitude toward your finances as well as spending and paying habits. It is simply not enough to conduct credit score checks from time to time. Once you have accessed your online credit score, proceed to evaluate the information shared by the bureau. Most online credit score checks will comprehensively list out the factors that affect your credit health and the fronts on which you have underperformed.

This will give you a clear perspective on the habits that you need to reign in and those that you need to amplify so as to accelerate the restoration of your credit rating.