Your credit score and the information on your credit report have a big effect on your ability to borrow money at a reasonable rate. They may also come into consideration when you apply for a job, an insurance policy, or a new cell phone plan. If you’ve had some credit missteps and your credit is considered bad, it’s time to get to work rebuilding your credit. You may wonder, “What is the fastest way to rebuild bad credit?”
Find Out Exactly Where You Stand
Start by obtaining a copy of your credit report. See what negative items are being reported, such as past-due payments and collections accounts. Missed payments remain on your credit report for seven years but will have less impact as time passes as long as you don’t miss any more payments.
Get Caught up on Past Due Accounts
If any of your accounts are currently past due, you’ll need to get them caught up as soon as you can if you want to repair your credit. While getting current on past due accounts doesn’t erase the fact that you fell behind, it does allow you to start building a pattern of paying as agreed. Setting up automatic payments with your creditors is a good way to make sure you never miss a payment because you forgot about it.
Pay Bills on Time
One of the biggest factors that can help to rebuild bad credit is always paying your bills on time. If you’ve had one or more past due payments, collection accounts, repossession, bankruptcy, or foreclosure, that information stays on your credit report for at least seven years. The impact of negative items lessens over time as long as you get in the habit of making your payments on or before the due date going forward.
If you have any accounts that are currently past due, work on getting them caught up as soon as possible. If it doesn’t seem possible to pay past due accounts, contact your lenders to see if you can set up a payment plan to help you get caught up.
Lower Your Credit Utilization
Another factor that can help rebuild credit fast is lowering your credit utilization. This refers to the percent of available credit you’re using on revolving accounts. Most experts recommend keeping this number below 30 percent. If your credit cards are maxed out, one way to quickly help to rebuild your credit is to pay them down below this level. A debt consolidation loan is a good way to do this, as long as you aren’t tempted to immediately borrow whatever you can on your credit cards.
Another way to lower your credit utilization is by increasing the total amount available to you on revolving accounts. Avoid closing credit card accounts that have a zero balance, since this impacts your credit utilization and also affects the age of your accounts, another factor that has some effect on your credit score. Opening another credit card account but not using the credit that’s available to you is another way to lower your credit utilization.
Rebuilding After Major Credit Problems
If you’ve had major credit problems such as bankruptcy or foreclosure, applying for consolidation loans or new credit cards is probably not an option for you at the moment. Start rebuilding your credit with a secured credit card, which is a credit card with a low credit limit that is secured by money you deposit. Another option is a credit builder loan or a secured loan.
Pay attention to what’s on your credit report. Errors on your credit report can make a bad credit score even lower, so make sure to dispute any errors you find. Dovly is an AI credit engine that can help you dispute any errors you find on your credit report. Try it risk-free with our free membership tier. Get in touch with Dovly today.