A blueprint for rebuilding your credit

So your credit isn’t great. It may even be suffering after a bankruptcy. Don’t give up – it’s possible to bounce back and rebuild your credit history. The most important thing to remember is that from now on, any credit you keep or open must be paid on time, every time. You will begin creating a better credit picture in just a few payment cycles, a positive trend that potential creditors can use to gauge how serious you are about putting your credit past behind you.

In fact, being able to repay a variety of new accounts is a key step toward rebuilding your credit. So, devising a strategy to open and pay off as many different kinds of accounts as you can is a better objective than simply adding more debt to an existing credit card – especially if you’re working toward future goals such as a mortgage or other large loan.

  • Rebuilding your credit can be similar to starting over from scratch, and starting small may be the easiest option. Credit cards from department stores or your local credit union can be useful.
  • If you can’t qualify on your own, ask a friend or family member to cosign for a small loan or credit card. If you can stay current on a major credit-card account or small auto loan, this will speed up the process of re-establishing good credit on your own.
  • Still no luck? Consider a secured credit card, which is guaranteed by a deposit that you make with the credit grantor. The cards offer the purchasing power of a major credit card. Just make sure the grantor reports payment histories to one of the three major credit bureaus so you’re building your positive payment history.
  • Use your new accounts in moderation and make payments that are more than the minimum. You can keep a small balance so that your positive payment history will continue to show up on your credit report.
  • Avoid carrying a balance that is more than 30 percent of your credit limit (creditors may view it as excessive debt that you may not be able to stay current with).
  • If you have money set aside, you can open such accounts for the sole purpose of paying them off.

It takes some time for your new credit history to gain momentum. You’ll be demonstrating that you are not depending on certain credit cards and loans for survival. That’s why opening and paying down accounts may make it a little easier to get more credit. With patience and timely repayments, you will likely be able to build a new credit history that creditors will look upon favorably when making decisions about your ability to handle even more credit.

This information is provided in partnership with ConsumerInfo.com, an Experian company.

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