From purchasing a new home to getting approved for a car, a lot of major purchases hinge on having a good credit score.
If you’re wondering how to rebuild credit so you can get back on track, there are a few simple things you can do to improve your score.
Read on to discover a list of five ways you can rebuild your not-so-hot credit so you can do more.
1. Get High Balances Down
The amount of credit you use, or your utilization ratio, plays a major role in determining your FICO score. If you want to know how to rebuild credit, start by paying your high-balance cards down as fast as possible.
A method called the “snowball method” can help you get those high-balance cards down faster. Simply put most of your money toward the card with the lowest balance until it’s paid off, then continue on to the next lowest balance until they’re all down to zero.
2. Stop Swiping
It’s tempting to use credit cards to make purchases on a whim, but this can cause serious damage if you want to rebuild your credit. Do your best to avoid impulse purchases and pay for things in cash whenever you can.
One way to reduce card usage is to put your credit cards in a block of ice (literally). This freezing method will make it more difficult to access your credit cards, which will make you stop and think twice before you use them.
3. Keep Old Accounts Open
Once you pay off a credit card, it might make sense to close your account. However, keeping accounts with a zero balance open can do wonders for your credit score.
The more accounts you have open with low or no balances, the lower your utilization rate will be. This can help boost your scores a lot faster, too.
4. Think About the Benefits of a Good Score
When your score improves, you’ll have a lot more buying power for all kinds of things you want or need. You can find out more about what a good score means for you to help you stay motivated.
Once you realize the possibilities that are open to you with a higher score, it’s much easier to stay on track. Use this as motivation and set a goal so you can rebuild your credit and improve your financial picture.
5. How to Rebuild Credit Using Your Credit Report
If you don’t know your complete credit picture, it’s much more difficult to rebuild your credit. Ask for a free copy of your credit report, which you’re entitled to once a year.
Go over your report closely and report any errors or inaccuracies that you see as soon as possible. The credit report will help you see areas for improvement and give you a clearer idea of where you stand.
Better Credit is Possible
As you learn how to rebuild credit, you’ll start to see your scores increase which gives you more purchasing power. Remember to avoid using credit to buy things, and work on getting those balances down instead.
Obtain a copy of your free credit report to help you start to get back on track.
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