How to Rebuild Credit Fast
Does your credit score need an improvement? If yes, then you are not alone. 44 percent of Americans have FICO credit scores that are classified as “bad”.
These are FICO scores that range between 350 and 649. If your score isn’t up to average, you could be wondering how you can rebuild your credit fast. Here is a complete guide to help you out:
How to Rebuild Credit Quickly: A Step-by-Step Process
Step 1. Make a commitment to change
Most people who have bad credit also tend to have poor money management practices. Since bad habits are difficult to break, you must stand up and take action to change them. Make a commitment that you will make your payments on time every single time you take out a loan or credit.
Start by talking to yourself about the reasons why your credit score is in danger. If you’ve lowered your credit score because of poor spending habits, then decide to make a change. It’s similar to taking a diet plan to boost the health of your body.
Step 2. Examine your credit report
Next, order an updated version of your credit reports from each of the three credit bureaus. Go through each report attentively, looking for mistakes such as accounts that aren’t yours or late payments that were not actually late, and accounts that shouldn’t be included in bankruptcy.
Figure out the factors that are slowing your score. Are there due to late payments? Unresolved claims? Credit utilization that is excessive? There could even be errors within your credit file that could be costing you points in a way.
Step 3 Dispute any mistakes
“If you find any mistakes in your credit file, you should contact the credit reporting agency to determine what’s needed to get rid of the mistake. If you discover mistakes within your credit file, you should take benefit of laws to protect consumers and clean those errors from your credit report.
Step 4: Cut a deal
Ask credit companies to waive late charges, which could severely damage your credit. If you request for them to throw you a bone, they are so keen to get your business that they’ll help you out, whether it’s your first or second time.
Some collection agencies provide a “pay for delete” option where they promise to erase the collection accounts from the credit file if you pay off the balance due, in certain instances, at a lower amount than what’s due. You must sign the contract in writing prior to making payments.
You can also try writing a goodwill note that is similar to a pay for delete. Ask that the collector or creditor take a credit card that you have paid off from your credit history because of goodwill.
Be sure to explain the reason you were late. There’s always a chance anyone who reads your letter is grateful and will make changes to your account.
Step 5: Tackle delinquent accounts
“Rebuilding credit takes time but the clock doesn’t get started until all debt is paid off. It is important to focus on the payment of all debts, so it won’t continue to show on your credit report as being in default.
If you have unpaid bills, make a move in the heavens and earth to get them paid.
Step 6: Calculate your credit utilization
“Your credit card balances that are open in relation to the credit limit for each account is called the ratio of credit utilization. The credit utilization ratio is responsible for 30 percent of your credit score. If you have high debt on your credit card your credit score will be affected significantly.
Your aim is to bring your credit utilization below 30 percent. This can be accomplished by either paying off debt or by increasing the amount of credit you have available.
Step 7: Reduce the balances on credit cards
“Pay the maximum amount you can to any outstanding revolving debts that you are owed, such as credit cards. This will lower your credit utilization ratio and could boost your credit score over just a few months.
You need to pay the lowest credit card balances first in order to be successful sooner. Make sure you pay down your debt rather than shifting your balance (i.e. enrolling in new credit cards with balance transfer).
Step 8: Boost the available credit
If finding new credit lines is difficult you might consider the possibility of a personal loan and or secured credit card through an online lender, local bank, local branch, or credit union to begin building creditworthiness.
Unlike a conventional credit card, secured cards typically do not require a strict credit check (You are usually able to possess a very poor credit score, but still be eligible).
Most secured cards will report the amount you pay on your bills to three main credit agencies namely Experian, TransUnion, and Equifax.
If you choose to go with the secure credit card option, you must make the largest security deposit that you can afford and prove that you can manage the risk of a greater amount of credit.
Step 9: Make small changes, and pay the balance
“If your credit score is low, or you’re just beginning your journey it is advisable to think about purchasing at least two credit cards for stores as well as purchasing low-cost goods and then paying off the balance prior to the time that interest is accrued.
They are usually more affordable than traditional credit cards, especially for those who have lower credit scores.” Shane Tripcony
Step 10: Make sure you pay on time, every time
If you’ve had a history of credit charge-offs, you must make sure that it doesn’t happen again. Even when you’re unable to manage to pay the minimum payments on your credit cards every month, be sure to pay promptly and also pay the other bills that are reported to credit bureaus.
If you’re having trouble remembering due dates, think about enrolling automatically in payments.
Step 11: Keep an eye on your credit report
Start being attentive! Most of the time bad credit scores are the result of letting your finances become too complex and not making sure you keep your lines of credit in order.
Monitoring credit reports may aid in identifying instances of identity theft since they can show recently opened accounts. The correction of errors and fraud in your credit reports can boost your credit score.
Step 12: Be Consistent
Rebuilding credit may take some time to do the right thing before getting the results. Don’t give up until the magic occurs.
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