Getting rid of the negative credit report information and catching up on past due bills will raise your credit score some. To increase your score to a level high enough to get loan approval and better interest rates (which happens to be above 720 these days), you’ll have to rebuild your bad credit. That means proving that you can handle credit responsibly. might be difficult, but once you build momentum, you’ll be coasting your way to a good credit score.
Start By Getting New Credit
If bad credit has left you without any credit cards, the first step is getting one. Many people swear off credit cards after bad credit, but that’s not the way to rebuild bad credit. Using a credit card the right way help you establish a positive payment history.
If your credit score is low, you’ll have a hard time getting approval from a major bank. Fortunately, you still have some options.
Build New Credit Habits
As the saying goes, “If you do what you always did, you’ll get what you always got.” To build new credit, you must replace your credit-damaging spending habits with some new, better ones. Otherwise, you’ll end up back where you’ve worked so hard to get away from.
Gone are the days of charging things you can’t afford, making minimum-only payments, and skipping credit card payments. Improving your credit score means staying well below your credit limit and paying your credit card bills on time, preferably in full.
- Dos and Don’ts of Using Credit Wisely
- Charging Only What You Can Afford
- 5 Ways to Build a Good Credit History
Pay Everything On Time
Even if a payment isn’t regularly listed on your credit report, it can eventually wind up there if you fall behind on payments. Avoid delinquencies on any accounts, even small ones like library fines, school lunch, and medical bills. More businesses are using collection agencies to follow up on their unpaid customer accounts. If one of your accounts lands in the hands of a debt collector, it goes on your credit report for seven years, ruining the progress you’ve made so far.
Replace Bad Credit With Good Credit
If practice really does make you perfect, the next step is to put your good credit habits into practice. Your bad credit won’t improve until you show your creditors that you have what it takes to build a good score. That means charging only what you can afford and paying your bill on time each month. During this rebuilding period, don’t take on too many credit cards because it can get hard to manage your balances and payments. One or two credit cards is plenty to get you started.