Unfortunately, there’s no quick way to “fix” a bad credit score. It may take months and years to get your credit back into shape if you have bad credit. But don’t be discouraged – here are a few steps you can take to ensure that you can rebuild your credit as quickly as you can.
1. Build A Budget & Get Your Finances in Order
First and foremost, you need to make sure you’re in a healthy financial position. To do this, you need to create a budget outlining all of your income, mandatory monthly expenses (such as housing and debt payments), and non-essential expenses (eating at restaurants, buying clothes, etc.)
By building a budget, you’ll be able to learn more about your financial situation and take steps to begin eliminating debt. This guide on “Budgeting 101” may be helpful if you’ve never budgeted before.
2. Pay Down as Much Debt as You Can
“Credit utilization” is a key component of your credit score, and it refers to how much credit you have available compared to how much you’re using. For example, if you have $9,000 in credit card debt, and you have a maximum credit line of $10,000, your credit utilization is 90%.
High credit utilization can negatively affect your credit score. Make a plan to pay down debt ASAP – you’ll save money on interest and boost your credit score at the same time!
3. Don’t Close Old Credit Accounts
After you finally pay off your credit card, you may be tempted to shut the account so you can’t overspend ever again. But don’t do this. The age of your credit accounts is a key factor in determining your credit score, and older accounts help improve your score. So, don’t close the card (as long as it doesn’t have an annual fee.) Instead, buy something small with it every once in a while, to keep the account open, and to enhance the length of your credit history.
4. Avoid Taking Out New Loans & Credit
Taking out a loan, such as a personal loan, will result in a “hard inquiry” on your credit report, which could lower your score. So, make sure you don’t take out new loans or credit, if possible.
In some situations, getting a new loan may be a good idea – such as a personal loan to help with credit card debt consolidation, for example. But if you’re already in debt, there’s usually no reason to take out more loans, and this can harm your credit score.
5. Automate Bill Payments Whenever Possible
This is a great way to eliminate late payments, which could negatively affect your credit score. Sign up for electronic notifications and automatic bill payments for everything you can – this will ensure you’re able to stay on top of your bills and keep them organized.
Work Toward Fixing Your Credit Score with These Tips!
If you can begin budgeting, paying down debt, and taking steps to improve your financial future, your credit score will improve, too. So, don’t wait. Start thinking about how you can use these tips and start boosting your credit right away!