How to Rebuild Your Credit: A Step-by-Step Approach

Building your credit is hard enough; rebuilding it can feel like a daunting, unending endeavor. No matter how old you are or how low your credit is, without the right knowledge, it can feel like you’re spinning your wheels and not moving forward much at all. These days, a bad credit score can keep you from being able to finance a refrigerator, a car, and even rent a home. Even some potential employers will run your credit, and a low score could prevent you from landing that dream job. With that in mind, we wanted to put together a short, step-by-step guide on how to rebuild your credit. So, take a few minutes to review what we’ve put together and find out how you can start raising that credit score.

1. Check Your Score

First off, you have to know where you currently stand, and there are several ways to get your current credit score. However, while several online options offer free reports, you need to get one from a reputable source. To get an accurate score, utilize one of these options:

• TransUnion – it’s imperative that you request an annual credit report so you can get a bird’s eye view of your score.
• Your bank – Many banks, as well as credit card issuers, offer free credit tracking.
• Credit bureaus – Most offer both free and subscription services for monitoring your credit score.
• Credit counselors – Some provide free credit reports.

Your FICO score is the one that most lenders rely on and the score is broken down as:

• 10% New credit.
• 15% Credit mix.
• 15% Length of history.
• 30% Payment history.
• 30% Balances owed.

2. Investigate

Now that you have your credit report, you need to review it thoroughly in order to determine if there are any errors. According to a Consumer Reports study, out of 3,000 participants, over 40% found at least one error on their credit report.

Check for these types of errors:

• Incorrect account balances.
• Closed accounts that are showing as open, or vice versa.
• Accounts incorrectly showing late or missed payments.
• Signs that you may be the victim of a data breach, such as accounts that aren’t yours.

The last thing you want is a bad credit score due to incorrect or missing information. So, before you attempt to buy that new car online, get your credit report and review it completely.

3. Dispute

Of course, finding errors is only half the battle. Now you have to dispute them and the credit bureau has 30 days to investigate. During the investigation, they will contact the creditor in question and they will review the claim. Once completed, they’ll contact you within 5 business days with their findings.

If they do determine that it’s an error and report it accordingly, it can take a few days for it to reflect on your credit report. So, if it doesn’t disappear immediately, don’t fret. Just give it a little time.

However, if the changes aren’t made within two weeks or the information reappears, report it again.

How to Rebuild Your Credit

Now, you need to build a good credit foundation and develop good financial habits.

1. Make payments on time.
2. Refrain from maxing out credit cards.
3. Avoid closing accounts that are paid off.
4. Don’t use credit you don’t need. Pay in full whenever possible.
5. Open a new secured credit card or become an authorized user on someone else’s card.
6. Apply for a credit-builder loan.

These simple steps can help repair your credit and raise your score. Get your report and dispute any errors, and then focus on the six steps above. However, if you still have problems or want more help, consider working with a credit counselor.