If your credit score has been negatively impacted, you might be wondering how you can rebuild it. After all, without good credit it’s hard to get the kinds of loans or credit cards that could help you maintain your credit score to begin with. Here are a few helpful tips to get you out of this catch-22.
What is a Credit Score?
It’s vital that you understand what, exactly, a credit score is if you ever intend to borrow money. It’s a numerical value assigned to you, personally, that indicates to lenders how trustworthy you are as a borrower. If you have a higher score, you’re more likely to pay your debts back on time without causing trouble for the lender.
You Can Rebuild Credit
If your credit is terrible, you’re not out of luck. You can rebuild your credit and prove to lenders that you’re trustworthy now. And trust us, you want to do this! Better credit scores lead to better interest rates, more success applying for housing, and numerous other benefits that you’ll really enjoy having.
Checking Your Credit Score
If you’re going to keep your credit score high, you need to first check it and see where it’s at. You can check your credit score for free online, but just remember that repeated “hard” inquiries into your score can actually lower it over time! “Soft” inquiries are a bit different and don’t usually impact your score.
Dispute Errors
If there are errors on your score, you need to dispute them with the three major credit bureaus. Sometimes, things you didn’t do could get attributed to you, ruining your credit for no reason. Make sure you’re up to speed with every item on your credit report and dispute any inaccurate information as soon as you notice it!
Credit Cards
One of the best things you can do for your credit is to take out a low limit credit card. These are great for things like buying gas or groceries, or whatever other recurring expenses you have. Just pay them off every month before they accrue interest and you’ll see your credit score improving steadily.
Keep Your Balance Low
Make sure you don’t overload your credit cards if you can at all help it! If you run up a huge balance and find it hard to pay the lender back, you’re actually only hurting your credit. They want to see consistent payments, on-time, rather than sporadic payments as your finances fluctuate.
Authorized User
If it’s too difficult for you to access a low limit credit card, consider having a loved one who can trust you add you on as an authorized user to one of their cards. This lets you basically piggyback on their good financial habits, growing your credit as they make their payments on time.
Credit Builder Loans
You can also consider getting a credit builder loan. This is a low-interest, low-value loan that some banks offer as a way for you to prove that you can be trusted borrowing money. Use it to help pay your bills for the month and then just pay it back as soon as the bill comes around! This is a surefire way to improve your credit.
Read More: These 10 Mistakes Could Ruin Your Credit
Make Payments On Time
It’s really vital that no matter what kind of loan you take out that you make your payments on time. This goes for things like your rent, car payment, and even utility bills, too! The more consistent you are in paying for these, the better it is for your credit score in the long run!
Read More: 10 Questions to Ask Before Taking Out a Personal Loan
Get Different Types of Credit
Finally, make sure you’re taking out different types of credit and paying the loans back on time. Having just a credit card or just a small loan is good, but when you prove that you can pay back loans from various lenders and of various types, it really shows the credit reporting bureaus that you’re trustworthy in a variety of financial scenarios!