Tips to rebuild your credit

Many people find themselves wanting to improve their credit score. If you’re in that boat, you can make it happen with time, effort and patience. By doing so, you could get better rates on loans and credit cards which can save you money over the long term.

Review Your Credit Report

Understanding why your credit score is low can help you change your habits and create better ones in the future. Missing payments or making late payments has a big impact on your credit score. Late payments, collections, and bankruptcies can remain on your credit report for up to 7 years, making it hard to obtain a low interest rate or even get credit at all.

Fortunately, you can work on rebuilding your credit with these steps.

  1. Order copies of your credit report. You’re entitled to a free credit report once a year from all three major credit reporting agencies (Equifax, Experian and TransUnion). You can access these reports online through Your credit report outlines all your accounts and details your payment history, including any missed or late payments.
  2. Dispute any errors you find. Review your report in detail. If you find any errors, contact the credit agency and lender. Credit agencies must respond to disputes within 30 days and remove errors, so you may see your score improve quickly. Errors could include issues like accounts belonging to someone with a similar name, accounts incorrectly reported as late, inaccurate credit limits, and more.

Now is the Time to Take a Look at Your Finances

  1. Revisit your budget. Take a hard look at your debt and spending. Are you overextending yourself and taking on more than you can afford? Are there ways you can cut back? A place to start would be to use that budget to track your spending by identifying your fixed expenses. You'll see how much money you have left over to use and can stick to your budget easier.
  2. Pay bills on time every month. Even if you can pay only the minimum, a record of on-time payments can help your credit score. You may even be able to change your due date to align with the day you get paid. More recent payment histories will weigh more heavily on your credit score than older information. Choose a payoff strategy that works best and stick with it.

Take Action to Improve Your Credit

  1. Contact creditors if you’re behind. If you can’t pay the minimum, talk to your creditor to see if you can negotiate a smaller monthly payment. Often creditors would rather lower the amount due each month than hand your debt over to a collection agency. You may also consider personal finance counseling which can help you get your credit back on track.
  2. Don’t open new accounts. Although you may be tempted by store credit cards that offer discounts and other perks, they generally have very high interest rates. You’re better off sticking to one low-interest-rate credit card than charging to multiple accounts. Also, applying for credit too often may lower your score.
  3. Pay down debt and don’t close old accounts. If you have older accounts that you’ve paid off but no longer use, leave them open. Lenders look at the length of your credit history as a factor in assessing your creditworthiness. They also look at how much credit you have available to use compared to how much you owe, so these factors will improve your available credit number (also called your credit utilization rate or debt-to-credit ratio).