Published On: May 7, 2017

How to Rebuild Your Credit

financial stress

Feel like you are stuck and cannot find a way out?

Are you overwhelmed by financial challenges?  Do you want to rebuild your credit?  Many people try to solve their problems in the privacy of their homes, rather than asking for guidance.  Fortunately, the Internet allows them to research answers to their financial questions, without exposing their situation to neighbors, co-workers or family.  Unfortunately, there is a lot of bad advice on the Internet, just like bad advice from neighbors, co-workers and family.

The best answers – follow your gut, do your own research and use common sense.

The following article gives some very simple suggestions about rebuilding your credit, whether after bankruptcy, or other financial disaster. I have not edited this article because it is short and to the point.  My thanks to the author for sharing this information.

How to Build Your Credit: Your Step-by-Step Guide

Step 1: Check your credit report on a regular basis

One of the easiest ways to build your credit is know where you stand, which means you should access and review your credit report at least once a year. More than one-third of Americans don’t check their credit reports regularly, but by law, you’re entitled to a free copy of your report each year from all three major credit bureaus — Equifax, Experian, and TransUnion. You can access your free credit report online here.

Step 2: Dispute credit report errors immediately

It’s estimated that 20% of credit reports contain errors, but if you’re among the 16% of Americans who never check their credit reports at all, you could be missing out on an easy way to boost your score overnight. According to the Federal Trade Commission, 20% of consumers who dispute credit report errors see their scores increase as a result, so if you spot a mistake, be sure to contest it at once. Credit bureaus are required by law to respond to disputes within 30 days, or otherwise remove the data in question, so you have nothing to lose by making your case.

Step 3: Pay your bills in full and on time

Your payment history plays a big role in determining your credit score, and if you make a habit of paying your bills on time and in full month after month, you can build up your credit sooner than you’d think. While there are other factors that come into play when calculating your credit score, your payment history carries more weight than any other aspect, so it pays to get into a good bill-paying pattern early on.

Step 4: Don’t use more than 30% of your available credit

Your credit utilization ratio, or the extent to which you’re using your available credit, is another factor that goes into calculating your credit score. You should always aim to keep your credit utilization ratio to 30% or less, which means that if you’re given a $5,000 line of credit, you should never borrow more than $1,500 at any single point in time.

Step 5: Pay down existing debt

Erase your debt whenever possible.

Paying off existing debt can help your credit in several ways. First, if you start making timely payments, it’ll boost your payment history. Additionally, the more debt you eliminate, the lower your credit utilization ratio will fall. A good way to approach your present debt is to tackle those balances that carry the highest interest rates first and then work your way downward. Another option is to transfer your existing high-interest debts to a credit card with a lower rate.

Step 6: Get a secured credit card

A secured credit card differs from a regular credit card in that it requires you to keep a certain amount of money in a linked savings account as collateral. Getting approved for a secured credit card is relatively easy, even if you’re not starting out with great credit, because your lender is taking on significantly less risk. But if you use that card and pay your bills on time, they’ll count toward your payment history just as regular credit card payments would.

Step 7: Become an authorized user on somebody else’s card

Getting your name added to an established account can work wonders for your credit score, even if you don’t actually use that card yourself. When you become an authorized user on someone else’s card, that person’s credit limit gets added to yours, which can help bring your credit utilization ratio down. Furthermore, becoming an authorized user on another card can help you beef up your credit history if you’re fairly young and haven’t had time to establish a solid one of your own.

Step 8: Take out a credit-builder loan

As the name implies, credit-builder loans are designed to help folks with poor credit improve their financial standing. You can open one through a credit union or bank, and once you do, the amount you borrow will be deposited into a savings account that you can’t touch until your loan is repaid in full. While a credit-builder loan won’t give you immediate access to extra cash, your payments will be reported to all of the major credit bureaus, which means you easily can boost your credit by sticking to the terms of your loan.

Step 9: Avoid opening too many new accounts at once

Some people shy away from checking their credit reports for fear that doing so will lower their scores. But while a soft inquiry, such as requesting your own credit report, won’t damage your score, a large number of hard inquiries could impact it negatively. Any time a lender delves into your credit history, it’s considered a hard inquiry, and having too many at once can hurt you. That’s why it’s best to open new accounts slowly over time.

Step 10: Keep your accounts open for as long as possible

Your credit history is another factor that goes into figuring your credit score. Unlike your payment history, which speaks to your ability to pay your bills in a timely fashion, your credit history represents the amount of time you’ve had active accounts. Closing an old credit card, therefore, can actually hurt your credit history, but more so than that, it can impact your credit utilization ratio by lowering your overall credit limit. Unless you have a pressing reason to close an old account (say, the introduction of a high annual fee), you’re better off keeping it open and being smart about how you use it.

giftGift for you from Diane – Starting-Over-Dave-Ramseys-Survival-Guide.pdf (1132 downloads)

By |Published On: May 7th, 2017|Last Updated: July 14th, 2022|

Share this article

About the Author: Diane Drain

Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.

*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*

Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Google Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Yelp Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Avvo Reviews
Avvo - Rate your Lawyer. Get Free Legal Advice.
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Alignable Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Better Business Bureau
5 / 5

“You folks are the BEST OF THE BEST in Arizona.” M.H.

You and Jay are the best attorneys I have ever had or needed and thank God for the Honorable Robert Gottsfield in recommending you folks – I would have never made it through the entire process without you and Jay and God Bless you both always and stay in touch as well. You folks are the BEST OF THE BEST in Arizona.

5 / 5

“My only regret is that I didn’t find Diane sooner.” K.H.

I can’t say enough good things about Diane. The way she handled my not typical circumstances was amazing. I was very nervous to start the bankruptcy process but Diane just has a very comforting way of explaining the whole process. My only regret is that I didn’t find Diane sooner. If you find yourself in a financial situation that you can’t correct on your own, please Call Diane Drain as soon as possible.

5 / 5

“Filing for bankruptcy can be a stressful life event” R.A.

Filing for bankruptcy can be a stressful life event, and selecting the right attorney can add to this stress. Diane and Jay were a pleasure to work with, and it is obvious that they are passionate about helping people get their life back on track. I would highly recommend them if you need a bankruptcy attorney.

Related Posts

  • Published On: July 24, 2022

    Want to avoid dishonest debt collectors?  Watch this video from FTC’s Consumer Advice By Joseph Ferrari,July 22, 2022 (reprint from FTC, Consumer Alerts) During Military Consumer Month 2022, the FTC [...]

  • Published On: July 20, 2022

    BEWARE OF THE SECRET COSTS OF USING ‘BUY NOW PAY LATER’!! What You May Not Know About These Services Services like “buy now pay later” now account for $100 [...]

  • Published On: June 19, 2022

    RELIGION AND BANKRUPTCY Bankruptcy has its roots in religion. No one should avoid dealing with debt because of misunderstandings about religious or ethical considerations. It is NOT shameful to seek relief from crushing debt! [...]

  • Published On: April 18, 2022

    Education Loans Can Be Discharged in Bankruptcy Busting myths about bankruptcy and private student loans By Robert G. Cameron – APR 12, 2022 (Reprint from Consumer Financial Protection Bureau "www.CFPB.gov".  The following is an [...]

My intention is to put you back in control of your life
Start with $0 down*. We provide affordable payment plans.

FREE CONSULTATION