Your credit rating can be damaged resulting in lower credit score due to many factors, such as late payment, no payment when the bill is due, collection, judgement, bankruptcy, foreclosure, short sale, or just a mistake on your credit report. However, you can build your credit back fast or rebuild your credit if you take the right steps.
Building good credit rating takes time, patience, and some efforts on your part. People new to credit have better chance building credit faster than someone starting over after a bankruptcy or foreclosure.
You have to take some actions to build your credit back or fix a bad credit score. Here are some tips to follow:
- You need to see your report before you can fix it. Your report will show you the negative things responsible for bringing your score down. You also will be able to see if there are any mistakes shown on your report.
- Your first step is to visit annualcreditreport.com. You are entitled to free credit reports every 12 months from the three major credit bureaus.
- Go over your credit reports carefully and look for any mistake. Challenge any issues you think is not right by entering disputes online with the credit reporting agency. Removing errors that is negative will boost your credit score.
- Open a second checking and savings account to show your stability.
- Apply for new credit card. If your credit application is denied, try a secured card and be ready to deposit into a saving account to be used as collateral for the card. Make small charges on your new card and make sure to pay the balance off each month to help you build your credit.
- Apply for a department store credit card and gas station card.
- After using your secured or other cards, apply for a credit card. The most flexible one could be the bank you’re dealing with.
- Pay all your bills on time. Skipping payments will hurt your credit rating. Plan to never miss another payment. A single missed payment could cause your credit score to drop by 100 points or more.
- Try to get small personal loan from your bank for duration of one year and make sure to pay your payments on time. Avoid getting loan from private institution.
- Try to pay off credit card debt, especially the one with high interest rates first.
- Do not use a lot of your available credit. Try to use 35-50 percent of your available credit and not more. If you’re in a tight situation, request the bank to increase your credit limit.
- If you have collections on your credit report that are relatively small, try to contact the appropriate collection agency and offer to pay it off if they agree to remove this negative from your credit report. Make sure to get this agreement in writing before sending them the money.
After foreclosure, it normally takes 3 years or longer before you will be considered for another mortgage. The mortgage lenders like to see at least 2-3 new re-established accounts for duration of 12-24 months without any late payment. If you have been renting, they want to see 12-24 months without any late payment before entering into a mortgage loan again.
If you filed for bankruptcy, Chapter 13, bankruptcy remains on your credit report for 7 years, while Chapter 7 bankruptcy remains for 10 years. It takes some time and effort to build back credit.
Both Chapter 7 and Chapter 13 bankruptcies negatively affect credit scores. However, Chapter 13 makes you a better credit risk than if you choose Chapter 7 to erase all your debts.
Paying loans that were not included in your bankruptcy such as auto loans gives you the opportunity to improve your credit score. Apply for a secured credit card to start building your credit rating. Car dealers often offer credit for purchasing new vehicle, but at high interest rates.
Make sure to pay all your bills on time. Once you have secured credit card that you have used for one year, it’s time to apply for new credit cards to boost your credit score.
By William Robinson – 2019 – Update 2020
Copyright © 2019-2020 Allied Publishing
For additional articles written by William Robinson, see alliedpublishing.com/building-your-credit. William Robinson is the author of How to Build Better Credit Rating published in 2019.