You need a stable credit history if you want to make any kind of large purchase that requires a loan. If you want to buy a car or house, having poor credit can have a severe impact on your loan options. Even if you do qualify for a loan, you with probably be hit with high interest rates and substandard terms if you do not have good credit. Although rebuilding your credit can be a difficult, drawn out process, it is a good goal to have because having a great credit score has numerous advantages. Here are five ways you can do so.
Concentrate On Paying Down Debt
If you are looking for an opportunity to rebuild credit, paying down your debt is an excellent place to start. Having a large credit limit will hinder you if you have nearly maxed it out. The more available credit you have, the better your credit score will be.
The act of paying off debt can seem daunting if you have a lot of it, but the payments do not have to be made all at once. With careful budgeting, you may be able to pay more than the minimum for each monthly payment, allowing you to slowly chip away at debt.
Keep an Eye On Your Credit Score
Checking your credit record periodically should be a routine practice. Not only does this allow you to see your current credit score and understand what to work on to increase it, but checking your record every once in a while can help you find errors and discrepancies. If you need to dispute an error, the faster you discover and report the problem, the less impact it will have on your credit.
Use a Secured Credit Card
Secured credit cards require you to link them to a bank account with cash, so the money in the bank can be used as collateral if you miss payments. People with poor credit often do not qualify for an unsecured credit card, so a secured card gives them access to a line of credit so they can rebuild credit. Instead of racking up credit with an unsecured card, use a secured credit card as a back-up plan so you are covered if you miss a payment. As long as you make payments responsibly, using a secured credit card is an excellent way to build up credit.
Keep Long-Running Credit Accounts Open
It is difficult to build credit if you have a limited credit history. The longer your credit history is, the more likely you will be to have a good credit score. Try to avoid closing accounts because you will have to start back at the beginning building your credit. Long credit histories can be rebuilt but limited histories may hinder you from qualifying for a new line of credit.
Catch Up On Missed Payments
If you have a long string of missed payments, your credit score is definitely suffering. Contact your credit card company and make a plan to catch up on the payments you have missed. Once these payments have been made, you can concentrate on paying off your debt instead of worrying about accumulating late-payment fees. One important thing to remember is that you must make sure to pay bills on time after catching up on late payments. Establishing good habits is vital to succeeding in rebuilding your credit.
A good credit history opens many doors for you and allows you to qualify for excellent loans when you need them. If your current credit score is less than optimal, striving to rebuild it is a worthy goal. By making a few changes to your financial habits and establishing new ones, you can begin to better your credit score so you can reap the rewards.