When Good Credit Goes Bad: How To Rebuild Your Score

good credit bad creditOur credit score can provide a very revealing picture of our relationship with money; there have been links between poor credit scores and increased numbers of insurance claims, which means that you may end up paying more for your car insurance or home insurance. You may not qualify for loans, or if you do, high interest rates lead to a lot of money going down the drain. If an unexpected job loss, catastrophic illness or other unexpected event, caused your score to take a nosedive, here are some tips to resuscitate it.

Check Your Credit Report for Inaccuracies

Mistakes are made all the time, and credit reports are by no means immune from this. The first step in rebuilding credit is to make sure you are working with accurate information. There may be late payments that were not actually late; if you filed for bankruptcy, make sure all the appropriate debts are included and not still being marked as delinquent. Check for any collection accounts carefully. Often times, a debt may passed onto another collector ,and if it is reported more than once, it will appear that you have more accounts in collections and more unpaid debts than you really do.

Set Up Payment Reminders

Timely payment of debts accounts for 35 percent of your score, and it is the most influential factor; naturally, since people lending you money want to know that you will pay it back on time. If the due dates for credit cards and other financial obligations are not etched into your memory, you may be unnecessarily jeopardizing your score simply because you are forgetting to pay bills on time.  But, this does not have to be the case. You can set up payment reminders and companies will send a text or email reminding you a payment is due soon. You can also set up automatic payments in most cases—do it once and you will never have to worry about a late payment again.

Get a Secured Credit Card

If you have filed for bankruptcy, or creditors have closed accounts due to late payments, you need to get your hands on some credit so you can begin demonstrating responsible behavior. A regular credit card may be out of the question, but a secured card is. With this type of card, you deposit a certain amount of money with the bank and you get a card with a credit line equal to that amount. Before choosing a card, make sure the issuer reports to all three credit bureaus.

Keep Credit Limits Low

Whether you are using a secured card, or are using current cards more responsibly to build your credit back up, the most important thing to keep in mind is keeping utilization low. Cards that are charged near their limits send a message you are living beyond your means. Ideally, you should use no more than 10 to 25 percent of your available credit. It is better to spread use around several cards than keeping a higher balance on just one, even though the amount of debt owed is exactly the same.

Kelli Cooper is a freelance writer who blogs about a variety of personal finance topics. 

Share this post:

Related Posts

Comments are closed.