4 Methods of Rebuilding Credit

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Rebuilding credit is one of the most important things that you can do if you have had credit problems in the past. There are a number of different ways that you could potentially go about rebuilding your credit. Here are a few methods of rebuilding credit successfully.

1. Use Your Credit Card

Many people are under the assumption that you need to cut off your use of credit cards when you get in trouble with your credit. However, this is simply not the case. This is a very popular misconception. If you want to rebuild your credit, you need to continue to use your credit card. You might want to focus on using it more responsibly than you have in the past. Credit is one of those things that you have to use in order to improve. If you never use it, it is going to dry up. When you want to rebuild your credit, you should make some small purchases on your credit card and pay off balances in full every month. By making regular payments to your credit card, you are going to be able to get a positive payment history going. Your payment history makes up approximately 35 percent of your credit score. Therefore, you want to put an emphasis on this aspect of your efforts.

2. Reduce Your Balances

You also need to consider reducing your balances on your credit cards. Even though you want to continue using them, you need to get the balances down to respectable levels. Another part of the credit score formula involves the ratio of how much debt you have compared to the level of credit that is available to you. You want to try to keep your credit card balances at less than 30 percent of what you have available to you. Ideally, you should try to pay off your balance in full every month. If this is not possible, you need to try to keep them under 30 percent.

3. Take on Smart Debt

You should also consider taking on smart debt. For example, you could get a secured loan at a credit union. This will allow you to put a certain amount of money down and then you will be able to use that money as collateral for a loan. Many credit unions will allow you to borrow the amount of money that you have deposited with them. This is going to allow you to get a positive payment history as well.

4. Take Out Personal Loans

Another way that you can rebuild your credit is to take out personal loans. Personal loans will allow you to borrow money and repay it over a set schedule. Most of the time, these loans are going to have a higher rate of interest. However, they will allow you to start making payments and rebuild your credit one payment at a time. You can get these loans at banks, credit unions, and other financial institutions.