8 Ways To Rebuild Your Credit

pay off credit card debt

Many people go through difficult financial times. Whether you have experienced a sudden job loss or have been forced to declare bankruptcy, building back your credit in good standing can be challenging.

Unfortunately, many lenders don’t want to take the risk of approving credit to anyone with a low score. As a result, it becomes difficult to obtain any credit with which you can rebuild your rating.

This vicious cycle can seem debilitating when good and honest people are trying to climb out of a temporary financial hole. While building your credit may seem like an impossible task, there are ways that it can be accomplished.

With smart investments and monitoring your credit rating, you can build a score that will allow you to move forward into a brighter future. 

The financial experts at Montanacapital.com can help you find the right short-term loan or secured credit card to help you improve your financial situation. It’s important to get the right financial guidance when you are trying to rebuild a solid financial foundation. Let’s take a look at a few ways that you can work towards rebuilding your credit.

1. Secured Loans

Secured loans are those that are based on a collateral arrangement. Title loans are the most common and easiest to obtain types of secured loans. For example, if you own a car, boat, or RV, you may qualify to take a loan out on the value of your vehicle. This type of arrangement rarely requires a high credit score as the lender is taking minimal risk. 

You will agree to hand over your vehicle’s title if repayment on the value is not repaid. You can qualify to borrow against the value of your car and have money in your hand in less than a day. As long as you make your payments on time, you can keep your vehicle and start building up your credit rating.

👉Join 10,000+ Subscribers

Learn helpful tips to get out of debt and build wealth!

    We won't send you spam. Unsubscribe at any time.

    2. Short Term Loans

    A great way to start rebuilding your credit is by taking out a short-term loan. Payday loans are a great way to find accessible short-term funds with reasonable terms. While you will pay a higher interest rate, it can be an affordable way to start rebuilding your credit as long as you pay back your loan on time.

    In addition, borrowing a small amount to be paid back in your next pay period can help establish a positive payment record and boost your credit score. 

    When you take out a payday loan, it’s wise to make a budget that includes your repayment amount. While payday loans can be convenient when you need money in a hurry, they are not designed to be a long-term lending solution.

    The incurred interest could leave you trapped in a lending cycle that will end up costing you in the long term. Put aside the small amount that you are going to borrow, and make sure to pay off your balance at the end of your term.

    3. Monitor Your Credit Score

    It’s essential to make sure that your credit history and score are accurate. It’s not unusual for there to be errors in your report. To ensure that you are starting on fair terms, you should request a copy of your full report and take a close look at all the entries.

    If you find errors or tradelines that have already been resolved, contact your creditors to correct the mistakes.

    Older or incorrect entries that remain on your credit history will make it difficult for you to raise your score. If you have declared bankruptcy, most of your creditors should be removed from your report, but that doesn’t always happen. When you get a copy of your report, take a close look at all the information to ensure it is correct.

    4. Retail Credit

    One of the easier lines of credit that you can get with a low score is a retail card. You may pay a higher interest rate for the privilege, but if you pay off your monthly balance, you can help to build your score.

    Start by making small, manageable purchases and then immediately paying off the balance. These types of transactions will help to establish a good payment history and build your credit score.

    Most retail credit cards are registered with the main credit bureaus, so all transactions should appear on your credit report. It’s essential to keep your purchases small and always pay off your balance on or before the due date. Don’t open an account and then leave it empty. You will need to show some activity for it to positively affect your credit score. 

    5. Beware Of Fees

    When dealing with those that have low credit scores or have filed for bankruptcy, lenders will sometimes take advantage and charge unusually high fees and interest rates. While this is understandable when the lenders are taking a higher risk, it is also an unfair practice, and you should avoid dealing with these types of lenders.

    6. Talk With A Credit Counsellor

    Credit counselors are financial experts who can help you navigate the system to rebuild your credit. Your counselor can help you find the right lenders and lines of credit that will help you start over. In addition, they will assist you in correcting any errors currently on your credit report and help you create a manageable budget. 

    7. Pay On Time

    One of the most common mistakes people make is assuming that the occasional late payment is not a big deal. In fact, every time you miss a payment date on your loans, bills, or credit cards, it leaves an impact on your credit report.

    Your credit may only drop a point or two, however, if you continue to pay late, your overall score can drop significantly. To help you pay on time, set up automatic payments for all of your borrowed credit lines.

    8. Authorized Tradelines

    A tradeline is an entry on your credit report. Every bill, loan, or payment that you have that is registered with the credit bureaus will show up on your report as a tradeline. If you want to improve your credit score, you may want to invest in an authorized tradeline. 

    Authorized tradelines are credible sources that are owned by another entity. When you become an authorized user, your name will appear on the account that is in good standing, but you won’t have actual access to the funds in the account. In essence, you are paying to borrow someone else’s good credit rating. 

    To help bring up your overall credit rating, you can invest in an authorized tradeline for a short-term period. It’s important to do your research before buying a tradeline. Take a look at the reviews for tradeline companies and ensure that you are dealing with a reputable firm. Talk to your financial advisor or your credit counselor about the benefits of adding an authorized tradeline to your credit report. 

    Wrapping It Up

    Living with poor credit or trying to dig yourself out from under a bankruptcy claim can be a discouraging process. It may seem like every time you want to apply for credit, you are faced with rejection. But, while the process of rebuilding your credit may be frustrating, it is possible.

    It may take some time and work for your credit score to recover, but you can do it. Follow these tips to help you rebuild your credit and move forward into a financially secure future.