Build your credit file:
Open new accounts which will report to the major credit bureaus. Most lenders and credit card issuers report to all three so this is easy to achieve. In order to establish any credit, there must be accounts open in your name. From there, you can begin to establish a good record as a borrower. If you know someone with great credit, you can also be added as an authorized user on one or more of their accounts to gain good credit that way (as long as they are making their payments on time).
Limit applying for new accounts:
This may seem counter-intuitive after reading the first tip, but it really isn’t. You need to open accounts to establish credit, but once you have done that, you want to make sure that you don’t go overboard and open too many accounts.
Having open accounts is important for building credit but you’ll want to make sure you do not open too many. When applying for a new account, you may be subject to hard credit pulls which hurt your score and can add up. Additionally, opening new accounts will decrease your average of accounts and decrease your scores. These are minor factors in the way your score is calculated but important to keep in mind, nonetheless.
Do not miss payments:
Speaking of making payments on time, this is a MUST for you to build good credit. Payment history is one of the main factors in building credit and you want to have a good track record. Payments that are at least 30 days late can be reported to a credit bureau and hurt your score. Stay on top of your accounts and watch your purchases. When an account gets reported to a credit bureau as “late,” it immediately hits your score hard. With every month that passes after the late payment, it’s impact will become smaller. Drops in your score are almost instant but bringing it back up is a slow process.
Catch up:
If you are behind on bills, paying them off can greatly improve your score. Additionally, this will stop
further late payments and fees. If credit card debt is something you struggle with, speaking with a credit counselor may be a good option. They may be able to negotiate lower payments and interest rates. Keep in mind that using a credit counselor should be a last resort as that is also considered derogatory. Settling bills for less than you owe never looks good.
Revolving credit accounts:
Having a high balance on revolving credit accounts can hurt your scores. Bring down the balance to
improve them. A good rule is to keep your credit utilization ratio in the low single digits.
How long does it take to rebuild my credit score?
This varies, based on how many discrepancies you may have, and can be anywhere from a quick fix to a long process. You can always dispute the late payments with the credit reporting agency and hope they drop off but that can be hit or miss. In many cases, the best option is to contact a credit repair company.
They will go to bat for you and work directly with the different agencies to clean up any errors.
Most negative marks will go away on their own after 7 years, sometimes fewer, and not affect your
score any longer. Bankruptcies can take 10 years. You can let time take care of negative marks but there are steps that can be made to expedite the process of getting your credit back into good standing.
