If you're looking to rebuild your credit, you might be feeling a little lost. It can be tough to know where to start, especially if your credit score isn't as high as you'd like it to be.
But don't despair! There are plenty of things you can do to start rebuilding your credit. In this blog post, we'll go over six of the best ways to get started.
So whether you're looking to get a secured credit card, become an authorized user, or get a co-signer, we've got you covered. Let's get started!
1. Pay on time
One of the most important things you can do to rebuild your credit is to pay your bills on time. This includes both credit card bills and other types of loans you may have, such as a car loan or mortgage. Payment history is one of the biggest factors in your credit score, so it’s important to make sure you are paying on time, every time.
If you have trouble remembering to make your payments on time, set up automatic payments with your lender or bank. That way, you can ensure that your payments are made on time, every month. You can also set up reminders for yourself, either through your phone or a calendar system.
Paying your bills on time is one of the best ways to begin rebuilding your credit. By making timely payments, you will show lenders that you are a responsible borrower and that they can trust you to repay your debts. This will put you in a better position to get approved for new lines of credit in the future.
2. Try to keep most of your credit limit available
When you're trying to rebuild your credit, one of the key things you can do is to keep your credit utilization low. That means using only a small portion of your total credit limit.
Ideally, you should aim to keep your credit utilization below 30%. That means if you have a total credit limit of $1000, you should try to keep your balance below $300.
If you can keep your credit utilization low, it will show lenders that you're managing your credit responsibly and that you're not overextended. This can be a key factor in helping to improve your credit score.
3. Get a secured credit card
A secured credit card can be a great tool for rebuilding your credit. With a secured credit card, you put down a deposit that becomes your credit limit. Because the credit limit is equal to your deposit, there’s no risk of overspending and damaging your credit score.
There are a few things to keep in mind when you’re shopping for a secured credit card:
First, look for a card with low fees. You don’t want to pay an annual fee or a monthly maintenance fee if you can avoid it.
Second, look for a card that reports to the major credit bureaus. Not all secured cards do this, so it’s important to check before you apply.
Third, look for a card with rewards. Some secured cards offer rewards like cash back or points that can be redeemed for travel. This can be a great way to earn rewards while you rebuild your credit.
If you follow these tips, you can find a great secured credit card that will help you rebuild your credit.
4. Get a credit-builder loan or secured loan
Credit-builder loans and secured loans are two options you can use to rebuild your credit. With a credit-builder loan, you borrow a set amount of money and agree to make regular, fixed payments over a certain period of time. The lender holds onto the money during the repayment period and releases it to you once you’ve made all the payments. This type of loan can help you build a positive payment history, which is one of the key factors in credit scoring.
With a secured loan, you put down collateral, such as a savings account, which the lender can take if you default on the loan. Because there’s less risk for the lender, these loans usually have lower interest rates than unsecured loans. And like credit-builder loans, making regular payments can help you build positive credit history.
5. Become an authorized user
An authorized user is someone who has been added to another person’s credit card account. As an authorized user, you’ll get your own card to use but the account will be in someone else’s name. The primary cardholder is responsible for making payments, but both the primary cardholder and the authorized user will have access to the account and its history.
Being an authorized user can be helpful when you’re trying to rebuild credit because it can give you a chance to show that you can manage credit responsibly. If you make on-time payments and keep your balance low, it will reflect positively on your credit report. And as your credit score improves, you may be able to qualify for a credit card or loan in your own name.
To become an authorized user, you’ll need to find someone who is willing to add you to their account. This could be a friend, family member, or even a co-worker. Once you’ve found someone, ask them if they’d be willing to add you as an authorized user on their account. If they agree, they’ll need to contact their credit card issuer and provide your name and other information. Once you’re added to the account, you should start seeing activity on your credit report within 30 days.
6. Get a co-signer
A co-signer is someone who agrees to be responsible for your debt if you can't or don't repay it. Co-signing is a big responsibility, and it's not something to be taken lightly. If you default on the loan, the co-signer will be on the hook for the debt.
That said, a co-signer can be a helpful way to rebuild credit. If you have bad credit or no credit history, it can be difficult to qualify for a loan or credit card on your own. But if you have a friend or family member with good credit who is willing to co-sign for you, it can give you the boost you need to get approved.
Just make sure that you're prepared to make all the payments on time and in full. If you default on the loan, not only will your credit score take a hit, but you'll also damage your relationship with the co-signer.
So if you're considering getting a co-signer, make sure it's someone you trust and that you're confident you can repay the debt. And remember, even with a co-signer, there's no guarantee that you'll be approved for the loan or credit card.
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