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Rebuilding your credit can seem like a daunting task, but it is definitely possible with a little time and effort. Here are some steps you can take to start rebuilding your credit.
Check Your Credit Report
The first step in rebuilding your credit is understanding what is currently on your credit report. You are entitled to a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once per year. Review your credit report to see what accounts are currently open, what accounts are closed, and what accounts have late or missed payments.
Always Pay Your Bills On Time
One of the most important factors in your credit score is your payment history. Make sure to pay all of your bills on time, including credit card bills, mortgage payments, and even utility bills. Late payments can have a significant negative impact on your credit score.
Lower Your Credit Card Balances
Another important factor in your credit score is your credit utilization ratio, which is the amount of credit you are using compared to the amount of credit available to you. Try to pay down your credit card balances as much as possible, as having high balances can lower your credit score.
Consider Opening a Secured Credit Card
If you don’t have any credit or you have a limited credit history, a secured credit card can be a good option for rebuilding your credit. With a secured credit card, you put down a security deposit that serves as your credit limit. As you use the card and make timely payments, you can build up your credit history and improve your credit score.
Consider a Credit-Builder Loan
Another option for rebuilding your credit is a credit-builder loan. These loans are designed specifically for people who are trying to build or rebuild their credit. You borrow a small amount of money and make regular payments over a set period of time. As you make on-time payments, you can improve your credit score.
Life happens. With a high credit score you can potentially save ten of thousands of dollars in interest payments throughout your lifetime. So start fixing your credit today. Be patient: Rebuilding your credit takes time. Don’t get discouraged if you don’t see improvements right away. Keep making on-time payments and using credit responsibly, and you will see your credit score start to improve over time.