A low credit score can prevent you from qualifying for attractive interest rates on a loan and also limit your options when applying for a credit card. Fortunately, anybody with damaged credit can restore their credit score over a few months and years. As long as they become more responsible with their spending and take steps to clean up their credit report, it’s easier to give that low credit score a boost. Here are ten easy ways to build credit the right way:
1. Make on-time payments a priority
A surefire way to build credit quickly, is to curb financial practices that ding your score. Missed payments and payments that are more than 90 days past due take their toll on your credit score. Making sure all payments are made on time needs to be a high priority. Consider making use of auto-pay options with creditors and service providers so you never miss a due date and always make sure there are enough funds in the funding account to avoid overdraft fees.
2. Make rent payments on time
Some landlords use rental payment systems that keep track of your account and also report timely — or missed payments — to one or more credit bureaus. Make sure your rent payment is going out on time month after month so you don’t run the risk of losing points on your credit score.
3. Open a savings or checking account
You want to appear trustworthy in the eyes of lenders and be able to manage your money efficiently, no matter how much you earn. Since your savings and checking account information doesn’t appear on your credit report, some lenders may ask you for a bank statement or two to verify that you have paychecks coming in and are making regular deposits and withdrawals. Just keep in mind that bouncing a check or incurring other fees may end up showing on your credit report.
4. Work with a credit repair specialist
One of the easiest ways to build credit is to ask for help. A credit repair specialist or financial advisor has the knowledge and tools needed to fix bad credit as quickly as possible. He or she might make use of a credit repair business software program that makes it easy to order credit reports, analyze credit history, and make recommendations to help clean up your credit.
5. Check the credit report for errors
An other easy way to build credit is to remove inaccurate marks from your credit report. Any mistakes or omissions on the credit report can lower your credit score. Make sure to check your credit report at least once a year to see if any creditors have been misreporting information and that balances are accurate. You can send dispute letters to have those reports to the credit bureaus changed so that your credit report is current and accurate.
6. Lower credit card balances
One of the factors contributing to your credit score is your available credit. This is used to calculate your credit utilization rate — the amount of credit you have compared to the amount of credit you have used. Lowering your credit card balances can help to improve your credit utilization rate which in turn affects your credit score.
7. Get a secured credit card
An easy way to prove that you can handle your credit responsibly is to get a secured credit card where you ‘pay’ to have a balance and then make your payments on time consistently. This type of activity tells the credit bureaus that you are being responsible with your credit and can be an effective way to rebuild damaged credit.
8. Don’t apply for any loans or credit cards
How can you repair credit when you continue to apply for more? Short answer: It’s not likely you will.
Outside of a secured credit card, you will want to avoid applying for any loans or credit cards since every inquiry will show up on your credit report — and lower your credit score by a few points. Applying for several loans or credit cards in a short period of time is also a red flag that you are in need of more credit. This could indicate that you are over your head in bills and are looking to credit cards and loans for financial support.
Lay off the new applications until you have a hold on your current financial situation.
9. Maintain a good job history
Few people realize that their employment history shows up on their credit report. Some employers might use that information as part of the hiring process but many lenders will also look at this information to verify your income sources and determine whether you are trustworthy enough to borrow money. A clean job history can make you appear more creditworthy in the eyes of a lender which means you could qualify for a loan that helps you rebuild your credit.
10. Don’t declare bankruptcy
Declaring bankruptcy is the ultimate credit killer since it will stay on your credit report for 10 years and make it impossible to get a loan. If you are struggling to make your payments on time and think you’ll never get ahead, declaring bankruptcy in an effort to start over might sound attractive. Unfortunately, it’s not the ideal solution for those who want that fresh start. Reprioritize your spending and talk to creditors to negotiate a payment plan so you can start making payments on time instead. This will help you rebuild and repair your damaged credit — even if it’s a slower process. A credit repair specialist can help.
If you want to help people rebuild credit quickly and get on a healthy financial track, consider investing in a credit repair software program to launch your own business. You could offer a wide range of services that help clients build their credit quickly, boost their credit score, and improve their financial situation. Learn more about our innovative credit repair software program here.