Rebuilding Credit: How to Rebuild Credit

A person’s credit can significantly affect his or her major financial decisions–having good credit makes it easier to get loans, enjoy lower interests, and work on better terms. But financial challenges can take a toll on one’s credit score. If you are wondering how to rebuild credit and how to improve your score, you are in the right place.

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What Is a Bad Credit Score?

In the U.S., there are three credit reporting bureaus that essentially control whether or not you are able to obtain loans and credit cards–Equifax, Transunion, and Experian. Each of these credit bureaus has their own method of evaluating your creditworthiness, and using these methods, they calculate a score for your credit history based on a variety of factors. The score ranges from 300 to 850. If you’ve missed loan or credit card payments or had financial hiccups in the past, these may be reflected in a lower than average credit score. Filing bankruptcy can also have a major impact on your credit and FICO score.

Can You Rebuild Credit?

Many people may falsely believe that once their credit is ruined by financial mistakes, they’ll never again be able to have a credit card or obtain a loan. They also may think that their score will never improve. This couldn’t be further from the truth–they say time heals all wounds, and the same is true for your credit score. By making timely payments on any remaining accounts and cards you have, your credit will slowly heal. That said, many people may be wondering if there are other ways that their credit can be rebuilt–the answer is: yes, absolutely!

Fortunately, there are several steps you can take to rebuild your score, like paying your bills and credit cards on time, keeping your credit utilization low, being careful with new credit, and consistently practicing good financial habits. Another great way to do this is to hire a Dallas credit repair business like The Phenix Group, which can view your credit reports and help you settle any credit issues and grow your score.

How to Rebuild Your Credit 

Rebuilding credit can be tougher than starting from scratch, as you’re trying to prove that despite financial shortcomings–even those not of your own fault–lenders, credit card issuers, or other credit organizations can trust in your financial responsibility. Luckily, even incremental changes can impact your credit score, and every step you take can lead you toward better financial options than you have today. These steps to rebuilding your credit score and improving your report include:

Review Your Credit Reports

Your credit score is affected by several factors. You must understand these to figure out your current credit worthiness and pinpoint areas where you can improve. Request a free annual credit report from the three major credit bureaus: Equifax, Experian, and TransUnion. If there are any credit errors, dispute them immediately, as these can hold you back. Correcting any credit report errors can potentially add points to your credit score quickly. Credit errors can be anything from incorrect information on your accounts to something more serious like fraud or identity theft.

Pay Your Bills on Time, Every Time

Your loan and card payment history is one of the biggest factors that affect your credit score. Missed or late payments can leave a mark for up to seven years. Pay your accounts on time, every time, even if it’s just the minimum amount–though you should work on paying in full as you go. Consider setting up bill reminders or automatic payments to keep up with your credit card bills. Good money management and paying off your personal loans can go a long way towards improving your credit report.

If you have some debt you’re unable to repay, you might wonder, does settling a debt hurt credit? While it’s still perceived negatively in your credit score, it’s better than just leaving the debt unpaid, since it shows you’ve reached an agreement with your lender. You also want to do your best to avoid bankruptcy because it can have a negative impact on your credit.

Some people consider getting credit builder loans as a way to show that they can make consistent payments on time. But the effectiveness of these loans will vary and may not be worth it with high interest rates.

Mind Your Credit Utilization

Using too much of your credit limit can hurt your credit score; most experts recommend you never go over 30% of your credit limit–the lower, the better.

Try a Secured Credit Card

Your credit score can go down if you open too many credit card and loan accounts in a short period. Instead, consider getting a secured credit card that requires a deposit upfront but works like any other credit card. Paying the bills that come from secured credit cards responsibly can positively impact your credit score. 

Keep Older Credit Accounts Open

One factor that many people may not realize is important to the credit reporting bureaus is the length of credit history. Your credit report will state the date you opened the account; the longer the credit history, the better. This shows that you and the financial institution have a long relationship, which increases trustworthiness.  It also shows that you can reliably make the payments on your loans and cards on time.

How Quickly Can Credit Be Rebuilt?

Rebuilding credit takes time, but fortunately, rebuilding your score may take less than you think. In general, as long as you have caught up with your payments and are no longer behind, you should start to see your credit score slowly rise each month. While the exact formula used by each credit reporting bureau is unknown, experience with the industry has shown that the best way to rebuild credit is to make timely payments. Typically, you can see your credit score start to rise within thirty to ninety days of catching up on any credit card or loan payments missed.

How Many Points Can Your Credit Rise in a Month?

By making timely payments, your credit score may rise by anywhere from ten to forty points. Your payments will impact your credit score depending on how consistent the payments are made. However, the exact formula used by each credit reporting bureau is different, so don’t expect each score to be the same and anticipate some wide fluctuations between your scores at each financial bureau. After a certain point, your credit score will stop rising so quickly and will reach a point where it balances out; however, in theory, your score should continue to rise on track with your payments, though very few people ever reach the top score of 850.

How Can I Raise My Credit Score by One Hundred Points in Thirty Days?

One of the fastest ways to raise your credit score is by identifying errors on your credit report and having them removed. This typically involves calling the credit reporting bureaus and reporting the report inaccuracies. Next, you’ll need to call your banks and obtain letters stating the correct credit information so that the credit bureaus can update their information on your report. However, this is a daunting process to undertake on your own–it involves hours on hold and possibly months of waiting for letters to arrive and be sent. Fortunately, there is an easier way to deal with these problems–using a reputable credit repair company and credit score advisor.

Credit Repair Companies: The Best Way to Rebuild Credit Score

While you can rebuild your credit yourself, it’s helpful to get some assistance from a credit repair company like The Phenix Group. These financial organizations are designed to help consumers improve their credit scores through the guidance and advice of experts who know their way around credit laws, consumer rights, and financial regulations. Using a credit repair company is one of the best ways to rebuild credit.

How a Credit Repair Company Can Rebuild Credit

How does a credit repair company work, exactly? The first part of the process is analyzing your credit report and tracking down any errors on your Experian, Equifax, or Transunion credit report. The company can then gather credit evidence and submit it to the relevant financial parties to challenge disputes. As previously mentioned, you can also do this yourself for your accounts, but having a credit repair company like The Phenix Group can help you navigate the complex bureaucracy properly. 

Aside from fixing credit issues, a credit repair business can also educate you about budgeting and finance, following credit laws, and best practices. You can learn about how to better manage your credit card balances, pay off loans, and save towards a house or retirement all while improving your credit score. They will base their credit advice on expert knowledge and years of experience, so you can be sure you get the best advice.

Rebuilding Credit Conclusion

Your credit score is an overview of your financial habits, particularly your ability and responsibility to settle your credit card and loan bills on time. Maintaining it is key to better financial options and credit, but there may be obstacles that can bring your score down. Should this happen, there are some steps you can take to rebuild your credit–one of the most convenient ways for you to rebuild credit is to hire a credit repair company like The Phenix Group. With their team of credit experts, they can help you improve your credit rating by fixing errors, negotiating with credit organizations, and guiding you toward becoming more financially responsible. With the help of credit specialists, you can work towards a good credit score.

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