Your credit score is a number that will follow you for your entire adult life. It will dictate the home or car you can afford, what kind of interest rates you qualify for, and sometimes even what kind of job you can get. Having a bad credit score can be a scary proposition in a world where most of us rely on credit opportunities for survival. Luckily, as I explained recently here, rebuilding credit is entirely possible and entirely in your hands. Here are some tips to help you begin to repair damaged credit:
- Pay your bills on time. Paying your bills on time goes a long way towards establishing a positive credit history.
- Keep track of your credit report. Keeping track of your credit report will give you a clear picture of the changes you need to make, alert you in the event of fraud, and give you the opportunity to dispute any inaccuracies.
- Pay your rent on time. One of the three major credit reporting agencies, Experian, has been reporting rent payments since 2010. Staying up to date on your rent will help raise your Experian score.
- Monitor your finances. Enroll in a financial monitoring program like Ready for Zero, Mint, or You Need a Budget. These programs are designed to help you keep track of all your accounts, the progress of your debt repayment, and to give you helpful reminders and notifications about due dates and savings opportunities.
- Set up spend tracking. Many credit cards offer spend tracking alert systems, allowing you to set a spending limit for yourself. When you reach it, you will receive an alert so you know it’s time to stop spending.
- Keep a healthy balance on your credit cards. Credit cards are the fastest way to start rebuilding credit. Keep any credit card accounts open that you already have, and if you have none and don’t qualify for a traditional credit card, apply for a secured card. Then, make regular timely payments and keep your balance at around 25% of your credit limit.
- Don’t forget utilities. FICO has recently implemented an alternative scoring system for people without credit history, or for those whose credit has been wiped out by bankruptcy. It tracks utility payments and how often you move. If you don’t have a traditional score, this alternative may help you qualify for credit opportunities, giving you the chance to rebuild based on regularly and responsibly paying your utility bills.
It may seem daunting, but a poor credit rating is not a life sentence. Getting your credit back on track is mostly about demonstrating your ability to maintain responsible financial habits. You can get started today by ordering your credit report, and by making a couple of changes, your score will start to rise within months.