Your credit score reflects your financial well-being and having a good score can be the key when you’re looking to access credit, apply for loans, and even get certain jobs. Unfortunately, we sometimes find ourselves in situations where our credit scores drop due to financial mistakes, making it difficult to access the credit we need.
The road to repairing your credit can be long, but the good news is that it’s not an impossible journey. Let’s look at the steps you can take to start rebuilding your credit.
1. Review your credit score
There are many factors that can influence your credit score, such as late payments or the total debt amassed. Check your credit report at least once a year to get insight on where you stand. If you find any errors or inaccuracies, dispute them so they don’t penalize you. By accessing the website www.AnnualCreditReport.com, you can request a free credit report from each of the three major credit reporting agencies - Experian, Equifax, and TransUnion - every 12 months. Note that www.AnnualCreditReport.com is the only site authorized by the federal government that allows you to get your reports with no strings attached. Don’t worry, monitoring your own credit score won’t hurt you – this is a debunked myth.
2. Pay your bills on time
Your payment history is crucial in determining your credit score. Late or missed payments can stay on your credit history for up to seven years. Make sure you are consistently paying your bills on time to help steadily improve your credit score. Setting up automatic payments can help ensure your bills are paid on time each month, providing you with peace of mind because you aren’t risking disruption of services or missing a payment.
3. Reduce your debt
If you have a lot of debt, start by paying down the balances on your credit cards and loans. Focus on paying off those with the highest interest rates first – this can help you save in the long run. If you have several debts with high interest rates, consider consolidating them into a single loan with a lower interest rate. This strategy can make it easier to manage your debt, however, it’s important to carefully consider your options and make sure you understand the terms and fees with any consolidation loan prior to signing up.
Try to keep your credit utilization ratio - the amount of credit you are using - below 30%, according to Experian. Generally, a lower credit utilization ratio indicates you are not maxing out your available credit and are managing your credit responsibly.
4. Seek professional help
If you're struggling to rebuild your credit, consider seeking professional help from a credit counseling agency. They can work with you to create a budget, negotiate with creditors, and develop a plan to pay off your debts.
Restoring your credit takes time and effort, but it's not impossible. By taking these steps, you can improve your credit score and work to conquer your debt. For more resources, check out our blog and our WalletWorks page to learn more tips and tricks on debt management in every stage of life. These resources are free to members and non-members. Not a member? Join today and get in on all our money-saving perks like free checking, debit card cash rewards, and more!
