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Rebuild Your Credit Score With Credit Cards

If your credit score is lousy, you’re not alone. In fact, it’s surprisingly common to have less-than-pristine credit history.

Even if you do your best to stay on track, life throws so many curves that you never know when you’re going to be hit with a financial challenge that leaves you struggling to maintain timely payments on your debt. And once you start sliding, charges mount, and your credit score takes a beating.

In might seem tempting to give up and resign yourself to a life without the ability to get financing when you need it. Don’t do that.

Instead, fight back and rebuild your credit score so you can get the credit you deserve when you need it most. Be patient, and you can rectify almost any damage. Read on to learn how.

3 Ways To Start Rebuilding Your Credit Score Effectively

There are three obvious ways to kickstart the credit-rebuilding process, so double down and address these areas first:

  1. Make sure there are no errors on your credit report.
  2. Reduce your overall debt.
  3. Pay all your bills on time every month.

1) Make sure there are no errors on your credit file

Before you do anything else, take the time to review your credit report and make sure there is no incorrect information bedeviling your score. Be certain to check with all three credit-reporting agencies because they report in slightly different ways.

If you find any inaccuracies or omissions, contact the relevant reporting agency and the lender. If you’re concerned about running a credit check, don’t be. Checking your own FICO score or credit score doesn’t influence your rating at all.

Once you’ve cleared any errors, the next step is to reduce the total amount of debt you’re carrying.

2) Reduce your overall debt

Fully 35 percent of a FICO-score calculation is based on your history of making timely payments on your debt and, as such, is one of the largest contributory factors.

The bad news is that fixing missed and late payments is pretty tough. If you frequently find yourself forgetting or unable to make payments, consider using your bank’s online reminder service or setting a calendar alert on your phone. The other solution is to set up automatic payments, so you never end up in delinquency.

If you have a history of tardy payments, you’ll need to be patient because it takes time to undo this. If you can establish a flawless long-term repayment history following a period of delinquency, you’ll see a positive improvement in your credit score. Stay motivated, and those solid payment patterns eventually will displace your checkered-credit past.

If any of your debt accounts are sent to a collection agency, the information will remain on your credit file for seven years.

If you have multiple credit cards and a handful of installment loans, try targeting one account at a time and sacrifice any spare funds until you pay it in full. Keeping open accounts that you pay in a timely manner are more beneficial to your credit score than closed accounts, but carrying less total debt is never a drawback.

3) Pay all your bills on time every time

Your credit utilization is responsible for the next 30 percent of your FICO score. This refers to the difference between your total available credit and your total debt (the amount of your credit that’s in use).
So, if you have credit in place but want to rebuild your rating, stay disciplined, make timely payments, and keep balances as low as possible on all forms of revolving credit, including credit cards. If you have a particularly high credit utilization, expect negative repercussions.

If at all possible, pay off your debt instead of simply shuffling it around. Adopt a simple but effective strategy here: Target the cards with the highest interest rates and systematically attack these until you pay them in full. It’s okay to make minimum payments on the other cards while you offload your surplus funds on the cards with the highest interest rates.

Once you pay off a credit card, do NOT close the account. Some people mistakenly believe this will raise their credit score, but it’s a short-term option at best. But don’t go to the other extreme and start opening multiple new credit cards in an attempt to increase your available credit to increase your utilization score. This could come back to haunt you by damaging your score rather than improving it.

More Steps to Rebuild Your Credit Score

  • Avoid opening too many new accounts too quickly: If you are fairly new to credit, resist the temptation to open a handful of accounts in short order. You’ll end up lowering your overall average account age and create a profile that many lenders will view as risky.
  • Reestablish your credit gradually with timely repayments of manageable debt: This is a much more balanced approach to rebuilding a weak or blemished credit score. Open new accounts sensibly and make your repayments on time every month. Be patient. The cumulative effect will be worthwhile.
  • Search quickly and methodically: If you’re rate-shopping for financial products – installment loans or credit cards – do so in a predetermined timeframe. Lenders view a trail of multiple credit searches on an ongoing basis unfavorably. When you conduct multiple searches in a concentrated period, you’ll avoid this adverse effect because you won’t appear to be constantly searching for more credit.
  • Use credit cards responsibly: If you have a reasonable number of credit cards and installment loans that you repay on time every month, you are guaranteed to improve your credit score over time. Right or wrong, someone who has no credit cards at all is viewed as a higher risk than someone who is managing credit responsibly.

The Bottom Line

If you want to rebuild your credit score with credit cards, be absolutely certain that you make all of your payments on time. Do this, and it’s only a matter of time before your credit score increases and credit doors open without a battle.

Writer

Vivaan Marsh is a professional writer, editor and an expert in personal finance. Her career as a professional writer stretch for over 11 years. One of her passions in life is to help everyday families with there financial problems, making their life a bit easier and explaining complicated topics in an easy way. Read more >

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