No matter how hard you try, there are times when your credit history may just take a huge hit. Whether you’re forced to file for bankruptcy, go through a rough divorce, or just make poor judgments when it comes to handling your money, you’ll likely see it reflected in your credit score. That is the bad news. The good news is that you don’t have to live with that bad score. To paraphrase a famous baseball movie, rebuild it and they will come (the good scores in this case).
Here’s how to rebuild your financial history and reclaim your previous high score in just a few quick steps:
- Keep a close eye on your credit report. You can’t hope to improve your score if you don’t know exactly what it is and why it has fallen. Everyone is entitled to a free report from the three main credit bureaus once a year, so make sure you get yours and go over it carefully to identify what the problem spots are. This is also important to help discover potential cases of identity theft, which can also bring scores down sharply.
- Get caught up on your payments and stay that way. No more bad score for you. The biggest factor in rebuilding your history is continually paying off your debts on time so that potential lenders see that you can be trusted. Figure out a way to catch up on any missed payments (even car loans and student loans or any other installment debts) and then make sure to keep up those payments from now on. If you can do that, it will be reflected in your score.
- Don’t close out your credit cards. When you’re facing financial difficulty, the first reaction is to mitigate the damage by closing out card accounts, but this can actually work against you. It helps to have a long-standing credit history, so wiping the slate clean may be a mistake. If you have to close down some accounts, make it the newer ones but try and keep the longest standing cards active, as this will help you down the road.
- Obtain a “secured” credit card. A “secured” card is tied directly to a savings account, which makes it easier to get approval. A regular, unsecured card will carry more weight in establishing a favorable payment history but secured cards still count. After several months of using a secured card, if you pay it off regularly and avoid your old, bad payment practices, you may qualify to be upgraded to an unsecured card. So getting a secured card first can be an easier way of getting back on your feet financially.
- Get an installment loan. Like a secured card, an installment loan, where you have a set term and set payment, can be easier to obtain than a rotating loan, but it still counts toward rebuilding your financial history. Auto loans are installment loans, so applying for a car loan can actually help you to rebuild your trustworthiness, provided you make your payments on time. “Buy here pay here” dealerships (like ours) specialize in helping people with poor payment histories. Again, this can be a quick and easy way to help rebuild your financial ranking.
How Long Does it Take to Rebuild Credit?
It’s important to remember that your quest to rebuild your payment history won’t happen overnight. It’s going to take time and effort to get your finances back on track, so you shouldn’t expect immediate results.
To rebuild your score, it can take a minimum of 60 days to start seeing improvement, but often it can take years to rebuild it to a high rank.
The Good and the Bad
You need to keep this mind and stick to the good financial habits you establish (and avoid the bad ones like the plague). The longer you can keep at it, the higher you’ll get your bad ranking to creep up. So while it may be a struggle now, it will be well worth it in the long run. Paying on time is good. Paying late is bad.
So that’s the best way to rebuild your score effectively. Keep these tips in mind and you’ll be back in good financial standing before you know it.
If you are in the market for a nice used car, give us a call. We’ll help you on your quest toward financial repair and trustworthiness. It’s one of the best ways to rebuild your bad payment history.