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How to repair your credit

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If you did not pay much attention to personal finance early on in your life, it’s possible that your credit report and credit score do not look good. If you fall into a debt cycle, miss some payments, and do other things that can negatively impact your credit score, chances are that it won’t look pretty. If you try to get any type of loan with that low score, your interest rate will be high (if you can get a loan at all).

How can you repair your credit? There’s isn’t a quick and easy fix, but it can be done over time. Here are some tips to help.

Request your credit report and take stock of all of your balances – Like anything, you can’t know where to go until you know where you are. Even though it might be painful, you need to get your report and do a full inventory on how much you owe, and to whom. This can help you to get a plan in place.

Get that plan in place, and stick to it – Once you know the state of your credit, it will help to know what to do. List all of your balances, and seek out which ones you can eliminate. Mathematically, it makes sense to start paying extra on the balances with the highest interest rate. Psychologically, it might make sense to start with the accounts that have the lowest balances, giving you a boost when you pay something off.

Make sure to make payments on time – No matter what you have to do to remind yourself, you need to be positive you are making payments on time. This type of consistency in making payments is vital to showcasing that you are going to be more credit-worthy.

Reduce your debts – Often a person’s credit will be bad because they owe a ton of money. The key then, obviously, is to reduce those debts. That will help your credit utilization. Another way to do this could be to increase your credit limit. However, if your credit is bad, this might not be a viable option.

Don’t close old accounts – Having a long credit history can be a big help to your credit score. Even if you have finally paid off an old card, don’t close the account, because that could shorten your credit history. If you can’t trust yourself to not use the account responsibly, then shred the card while keeping the account open.

Any other tips to help repair credit?

3 Responses to “How to repair your credit”

  • You see the “don’t close old accounts” advice repeated in many places. For people who are trying to repair credit it may do more harm than good.

    Closing an account does not shorten your history in a meaningful way. The history for that account remains on your report for another seven years. By that time you will have seven more years of history on other accounts.

  • […] Myth: A poor score means I won’t get credit. While it is true that a poor score will hurt you from getting credit (and from getting a good interest rate on your credit), it doesn’t necessarily haunt you. It is just one of many facts that a creditor might use, so you could still get credit if your overall portfolio is solid (or vice versa, get denied even with a good score). Plus there are ways to repair your credit. […]

  • […] might seem like a daunting task, but there are plenty of baby steps that will help out and repair your credit. These steps allow you to slowly build up to a good score. With a better credit score, there are […]

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