The Best Way to Rebuild Credit and Improve Your Credit Score in 2020

Your financial health is an essential component of your overall well being, and your credit score is a direct reflection of your financial health.

A credit score is something that will stick with you for life, and unfortunately, there is no magic wand that will improve your credit score if yours is below average.

best way to rebuild credit

If you have a bad credit score, you need to learn the best way to rebuild credit, fast, so that you are not going to suffer in the New Year.

The problem is, research shows that a low credit score can affect your ability to get a loan of any kind, and if you do get one, you will be hit with high interest. It can also affect your ability to find rental properties and much more. 

So, what’s the best way to rebuild credit? Keep on reading to learn how you can improve your credit score for 2020.

1. Pay Your Bills On Time

This may sound like an obvious answer, and the oxymoron to this is that it was probably late payments that brought you to poor credit in the first place.

The only way to fix your poor bill-paying habits is to correct them and force yourself to pay your bills on time! 

This doesn’t just mean paying your bank loans and credit cards on time, this includes all of your bills such as your phone bill, electricity, parking tickets, and any company that sends you an invoice.

Some ways to improve this are:

  1. Setting an alarm on your phone to remind you when a bill is due.
  2. Automating your payments to come out of your bank account on the appropriate day.
  3. Being prepared with a good filing system to keep track of every monthly/yearly bill.

The faster you fix this problem, the sooner your credit score will improve.

2. Review Your Credit Score

In order to correct your credit score, you need to understand what has negatively affected your credit in the first place. You are limited to one free credit check per year via the annualCreditReport.com website. Make sure you pull your report from the three main credit report bureaus:

  1. Experian
  2. TransUnion
  3. Equifax

You will notice some specific hits on your credit score, and what caused them in the first place. This could be:

  • Multiple Credit cards
  • High Credit card balances
  • Multiple loans
  • Older loans or credit balances
  • Low balances on your credit

3. Check Your Credit Score for Errors

Credit companies can make mistakes, but it is mostly up to you to catch these mistakes and bring it to their attention. Unfortunately, this kind of mistake affects your credit, and therefore your future.

If you catch an error, you must file a dispute with the credit bureau, and it is up to them to investigate this issue and correct it. Make sure that you keep in constant communication with them, as the sooner you get this corrected, the better it will be for your credit.

4. Keep a Lower Balance

It is understandable that once in a while you will have a major payment to make, such as car repair, tuition, or medical costs. However, it is essential that for the most part, you keep your credit card balances on the lower side. 

The higher your balances are, the more of a financial risk you will appear to money loaners. If you are constantly floating near a high balance, it shows that you are not good at repaying the money on time. 

A great way to fix this is to keep your balances at around 30% or lower, this makes it much more achievable to pay off your loans and it won’t feel as intimidating to you with such a high amount.

If necessary, you can also request a higher credit limit in order to keep the percentage down and closer to 30%.

5. Do Not Make Multiple Applications

While having multiple accounts and cards may seem like a great way to borrow more money, it is very harmful to constantly apply for them.

Every time you make numerous applications, those companies have to check your credit, which sets an alert, the more this happens, the more it will appear as desperation in the eyes of the credit bureau.

Be more strategic about where and who you decide to apply for a loan with, do some investigating before you go through the entire process and credit check.

6. Keep Your Current Accounts Open

It may seem like a great idea to close all your credit cards in order to get on top of your credit issues, while unfortunately, this couldn’t be further from the truth. 

Having multiple cards with a zero to low balance displays that you are financially responsible and you know how to handle the money that has been lent to you.

Keep your cards open and available, even if you rarely use them. In the case that you may need it for an emergency, it will be your backup. In addition, by paying these types of payments off quickly, it will do wonders for your credit score.

7. Get a Tradeline

Most people have no idea about what is a Tradeline of credit, and the great benefits it has for your credit-rebuilding process. 

A tradeline is like having a co-signer, but for your credit score. This is an excellent way to improve your credit score, and it is completely authorized by Federal regulations. 

Learn More About the Best Way to Rebuild Credit

The best way to rebuild credit your credit score involves patience, determination, and careful observation. By following the above information, you are well on your way to having a better credit score in 2020. 

Just remember to stay on track, and keep your eye on the prize, and you will be surprised by how much your credit score will improve!

If you found this article useful, check out more information like this under the financial wellness section of our blog. 

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