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How to start rebuilding credit

It's all about building good credit use habits today to rebuild your credit for the future.

You can rebuild credit. Here's where to start:

It's all about building good credit use habits today to rebuild your credit for the future.

If you feel like your checkered credit past is preventing you from ever getting a loan for that dream home, or a new car, you're not alone. Learning how to rebuild credit doesn't have to be hard or confusing. Rebuilding your credit is a science more than it is an art. There are steps you can take today to begin the climb back to the top of the credit mountain.

Think of credit like an adult report card. Like in school, you want to get a good grade. Your credit score is yours and yours alone, and it's with you for the long run. So, it's a good idea to take the first step toward managing it ASAP, no matter where you're starting. Taking steps to start today will get you on the right path toward progress, sooner than later.

If you're in the rebuilding stage, it will probably take some time, and that's okay. Unfortunately, there is no magic solution (or company) that can fix your credit overnight, but there are steps you can take now that will help you gain momentum toward progress.

With consistency, persistence, and keeping your eye on the prize, you can make progress toward shaping your credit - so ideally in the future you can nab that loan, and with the best interest rate possible.

Try This to Start Rebuilding

  1. Make sure you're paying at least the minimum payments on all of your debts on time.
    This is the most important factor that affects your credit score. It impacts 35% of your score (here's a breakdown of the factors that determine your score). This shows financial institutions that you're being responsible with you credit. Even if you've had some hiccups in the past, this shows lenders you've gotten back on track.
  2. Pull your credit report to check for accuracy.
    If your credit score is your 'final GPA in school', then your credit report is the transcript of all your classes. You'll want to make sure everything on the report is correct. If you need to, there are instructions included on your credit report on how to dispute any false information. This is important because all of the information in the report determines your score. Removing incorrect info could cause a quick bump up in score.
  3. Build a plan for how to fix your credit.
    There are five factors that impact your credit score. How they interact with your financial decisions day to day is important for understanding what actions you can take now to begin rebuilding credit. Look at your credit report to pinpoint where your setback happened in the first place: high card balances, missed payments, too many accounts open? Turn the knowledge of what happened in the past into improved actions today, and begin making decisions that build that momentum up the credit mountain.

What Now?

Check out Annual Credit Report to get a free copy of your report. There are also a number of online resources that will provide you with your score for free.

It can be an intimidating process to start, but like a pulling off a band-aid, often times the worst part is just doing it. Once you've reviewed the info you'll be able to level set with where you're at today, create a game plan, and in time get back to the top of the credit mountain.

What is Financial Friday?

Financial Friday is a series dedicated to financial education and actionable tips meant to inspire progress toward your financial well-being. Subscribe to Next Door® to get Financial Friday articles delivered to your inbox.

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