Things You Need to Know before you Can Start Rebuilding Your Credit Score

Much has been said about rebuilding poor credit ratings. Much will still be said even when everyone has a good rating. Should this happen or even fail to happen, one fact remains true. A low score can kill most if not all of your dreams. It will keep you from getting a car loan, buying a home and of course, qualifying for a credit card. It does not end there. The unimpressive credit rating will make the cost of your debt much more expensive than you can ever think of as you will be subjected to high and exorbitant interest rates.

Considering the above mentioned facts, it goes without saying that one must always know his or her credit rating and how to rebuild it if the score is low. The process is simple. It starts by understanding how credit scores work and how one can gradually make his or her score better. Through the entire process, the most important thing is to understand what caused the rating to drop in the first place. That is where you may have to review your spending habits.

  1. An impressive payment history will always give a perfect credit score. Bankruptcies, late payments, loan forfeitures and judgment against results always result in low credit rating.
  1. 2.     Using too much credit is yet another cause of a poor score. Each time you sign up for a credit card and you get it, you are issued with a maximum credit line.  Going beyond the maximum line can be detrimental to your score. This is simply because the score always looks at how much of the maximum line you used. If you keep your credit card utility at 30 percent or less of your credit, you will get a perfect score.
  1. Keep off the habit of opening or applying for too many cards. This can significantly hurt your scores.  It simply results in too many inquiries and also shortens the average length of your credit history.

Make Payments on Time and Pay off your Debts

This is a self explanatory tip but so many people fail to get it right.  If you have active credit card accounts, ensure that you make on time monthly payments for the accounts. There is no shortcut or magic bullet. Simply make the payments on time.

You Need Credit to Rebuild Credit

Just like you need money to make money, you also need credit to rebuild credit.  It may sound impossible to rebuild credit card rating without a credit. Well, the truth is that you really cannot do so. You just have to have a credit available so as to show that you can be responsible with it.

You do not need to open a credit account if you do not have an active credit card. This is often the case especially if you have poor score already. The only thing that can come to your rescue is a secured card. It is just like a credit card only that it requires collateral in solid cash form. It has a credit line that is equal to the amount you pay. Like you may have guessed, secured cards have high interest rates. Once you have the cards, ensure that your lender always reports to the three major credit bureaus which include TransUnion, Equifax and Experain. This way, all your on time payments will show up on your report and will subsequently help you to raise your score.