How to Rebuild Your Credit Score

Your credit score is more than just a number. It’s a representation of your overall financial wellness. In fact, lenders will use this number to help evaluate how likely you are to repay a loan along with the interest rate you’ll be charged. The better the credit score, the more financial freedom you typically have. But what happens if you need a credit rebuild?

In this Clearview blog article, we will explore how to rebuild credit by implementing some small but mighty money habits into your financial life.

Request a copy of your free credit report

To understand how to rebuild your credit score, you have to know where you currently stand. Don’t forget that you’re entitled to a free credit report every 12 months from each of the three major bureaus: Equifax®, Experian®, and TransUnion®. You can request all three at once or spread them out to monitor your credit throughout the year without impacting your score.

Once you have your free credit report, you can start examining it for accuracy, which brings us to the next step.

Fix errors on your report

Did you know that errors on your credit report can have a direct impact on your score? The Fair Credit Reporting Act (FCRA) obligates credit bureaus to respond to error inquiries within 30 days and proven errors are to be removed immediately. Once you have your free credit report and discover an error, you can submit a dispute form on any one of the three major bureau sites. Take care of your report and your score will take care of itself.

Make all payments on time — all the time

Here’s a (not so) fun fact. Late payments remain on your account for seven years. Fortunately, as time passes, their impact wanes. A late payment made five years ago, for example, will have less impact on your score than a late payment made last month. Remember, 35% of your credit score depends on payment history.

We understand that balancing all your payments every month is sometimes easier said than done. However, if you want to rebuild your credit score, making consistent payments is key. Here are a few tips to help you navigate those tricky waters:

• If you’re able to pay on time, but made late payments because you had 700 other items on your to-do list, set up automatic payments.
• Contact the companies you owe. Many have established programs to lower your payments or delay their due dates.
• Consider a debt consolidation loan. These enable consumers to combine the balances of credit cards and/or installment loans into one monthly loan payment.

Start building some good credit

Sometimes too much of a good thing can be bad! Applying for multiple credit accounts at once can hurt your score, so it’s important to be selective. New credit accounts make up 10% of your credit score, and lenders prefer to see a proven track record with a reliable payment history.

What’s an example of good credit? A secured credit card is a great option for rebuilding your credit. It requires an upfront deposit that serves as collateral. By borrowing against your own money and making on-time payments each month, you demonstrate responsible credit usage, which is exactly what financial institutions want to see.

Watch your credit utilization ratio

Lenders like knowing that you have the self-discipline to not spend every dollar available. Avoid ringing up balances that are more than 30% of your total available credit. For example, if you have $10,000 limit, you should keep your balance under $3,000. Keeping utilization below 10% is considered excellent and could go a long way when it comes to the credit rebuilding journey.

Have patience and stay consistent

A proven track record, like an old friendship, can really speak well of you, but it takes years to nurture. Length of credit history counts as 15% of your score. If you have filed bankruptcy, it can take anywhere from 7 to 10 years before this is removed from your record.

You don’t have to figure out how to rebuild credit alone

If you’re feeling overwhelmed, we encourage you to reach out. We partner with GreenPath™ Financial Wellness to offer free financial counseling services, including credit counseling.

Following these tips are sure to help show you how to rebuild credit over time! Always remember that personal finances should be treated like marathons, not sprints. When it comes to improving your credit, the most important thing is that you start implementing smart money habits and progress will surely follow!