It doesn’t cost much to damage a good credit score. A missed payment here, a late payment there, and before you know it, your score has dropped below 600 and in dangerous territory. As soon as your score drops, you will find that loans are more difficult to acquire while your interest rates go up. In addition, you may have to pay more for insurance – and you may not be able to rent that great apartment that you wanted. In addition, many employers check credit scores as part of the approval process when hiring new employees. In short, a low credit score can really affect your life.
It can be a hard way, but rebuilding your credit score is definitely worth it – often the hardest part has just begun. Fortunately, there are a number of tips to help you on your way.
How your credit score can crash
Two of the most stressful events in life – divorce and bankruptcy – can do great damage to your credit score. Divorce can make you emotionally devastating, but it can also leave you with debts that last long after the trauma of the legal battle is over. During a divorce, it is important to be sure that your divorce letter separates all debts about who is responsible for paying them. Close all shared Private Lender rich accounts that are being paid out and check them by ordering a free copy of your credit report so that you can see which debts and accounts bear your name.
The decision to go bankrupt is also a painterly Good Lender experience that can make an impact on your credit score. However, the effect is temporary and with consistent efforts, you can rebuild your score into a star rating. As long as the bankruptcy is mentioned on your credit report, your credit score will suffer. If your score was high – say about 750 – a bankruptcy will lower the warning Private Lender by 100 points.
All individual accounts that you owed when you filed for bankruptcy are deleted from your report after seven years. Check your creditworthiness report and make sure your bankruptcy is removed as soon as it is eligible to be cleared.
Steps to rebuilding your credit score
1. Open a bank account
For those who have bad credit, opening a bank account may be easier said than done. You may have to look around, but there are banks (such as Wells Fargo) that offer opportunity accounts to people with a bad reputation. Just be prepared to live with limited services and higher costs until you are able to rebuild your credit.
You should also contact your local banks and credit unions, as they are more likely to work with you. You can find a credit association in your area by going to the website of the National Credit Union Administration.
2. Receive a secure credit card
Ensure a secure credit card by using your bank account as collateral. With a secured card, you can charge the amount to your bank account. Avoid cards that charge an application fee and look for cards with low annual fees. Also, make sure you choose a card that is mentioned in your credit report and, if possible, select a card that converts unpaid cards to an unsecured card after one year.
3. Get an installment loan
After working with your bank or credit association for several months and proving that you are a good customer, you may be able to convince them to lend you an installment loan. Keep it small – less than $ 1,000 if possible.
The purpose of the loan is not so much to make a purchase as to give you a new chance to show how responsible you are to pay your debts. Keep the amount borrowed and the payment amounts small enough to ensure that you can make all payments on time. This is the time to show that you can make regular payments. The best way to do that is to set up automatic payments through your private banking system.
4. Pay your student loans
If you owe money to your student loans, you must give them a priority. These loans will follow you throughout your life and they cannot be released through bankruptcy. As soon as you are in repayment mode, student loans are displayed on your credit report. Any missed or late payment will derail your efforts to rebuild your credit score.
5. Become an authorized user
You may be able to rebuild your credit by using the credit of a friend or family member and becoming an authorized user on their credit card. They must contact their credit card company and you have added to their account. That credit card is displayed on your credit report and your score benefits from the good payment record of your friend.
As an authorized user, you are also entitled to a card – but if you appreciate the friendship, it is a good idea to completely refuse the credit card and not use it.
6. Avoid Prepaid cards
Stay away from prepaid payments and credit cards as they charge fees and charge high-interest rates. Offered by large companies they have the Visa or MasterCard logo – but don’t be fooled. You pay almost twice as much as all purchases that you charge with cards such as these. Moreover, they usually do not appear on your credit report, so there is no real benefit in using it.
7. Improve your habits
It’s time to convert a new sheet and correct the behavior that crashed your credit score. Make sure you do the following:
- Only keep a few credit cards in your possession.
- Distribute and remove credit card applications that come in the mail.
- Maximum your credit cards not.
- Only charge a maximum of 10% of your credit limit.
- Pay off your card balance in full every month.
- Never miss a payment.
If you believe that you need more support with your reform efforts, contact your local Consumer Credit Advice office. This non-profit organization offers free and cheap assistance to people in need.