You Can Start Rebuilding Credit Quickly with These Best Ways to Rebuild Credit
If you want to rebuild your credit, know that the need to rebuild credit is extremely common. Studies have found that almost one-third of Americans have only fair to poor credit scores, yet many people are still left wondering how to rebuild credit fast.
We would like to bring some clarity to the problem of building credit. This will be your ultimate guide to rebuilding credit quickly this year. Below, you will find the best ways to rebuild credit.
We will start the conversation on rebuilding credit by explaining what credit actually is, so you are sure to understand the nature of the problem: why building credit even matters.
Then, we will go into helpful tips for building credit back up as fast as possible – these ways to rebuild credit include everything from disputing errors on your report to helpful ways to pay your bills on time.
Credit rebuilding should not be a mystery. That is why we want this guide on rebuilding bad credit to show you how to gain financial freedom this year.
Credit Scores 101
Before we go any further on describing the best ways to rebuild credit, it is important to make sure we understand exactly what a credit score is, what qualifies as a good credit score, and what qualifies as a bad credit score.
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Your credit score is a number that you will be given that represents your creditworthiness, meaning how risky it might be for somebody to lend you money. If you need to rebuild credit, lenders will consider you a higher risk for not paying back your debt.
If you have high credit, this shows future lenders that you have a good track record of paying back your debts consistently and on time.
If you have bad credit, this shows future lenders you have had issues with paying your debts on time, or at all. You will want to start rebuilding bad credit as soon as you can.
The lowest credit score is 300, and the highest is 850. This is a general guide of credit score ranges:
- 800 – 850 = Exceptional/excellent credit
- 740 – 799 = Very good credit
- 670 – 739 = Good credit
- 580 – 669 = Fair credit
- 350 – 579 = Poor credit
While those with poor or fair credit may be most interested in rebuilding credit, some with good credit may want to start building credit up to excellent.
Why You May Need to Rebuild Credit
Why is rebuilding credit so important? If you have a poor or even fair credit score, you will have a harder time getting many things you may need in your life.
The need to rebuild credit fast might include but is not limited to:
- Applying for a new credit card
- Buying a car
- Purchasing a home
- Getting a loan
For those who know they will be needing to do any of the above activities soon, rebuilding credit fast can be extremely important.
If you know you will need to start rebuilding credit, we have a list below of the eight best ways to rebuild credit quickly. These are also great tips to follow for building credit for the first time.
Best Way to Rebuild Credit #1: Know Your Score
You cannot know where you are going when it comes to rebuilding credit unless you know where you have been. The first step you should take to rebuild credit is to check your credit score.
There are three major credit reporting agencies, and they will give you one free copy of your credit report each year to give you information for building credit up. They are:
There may be plenty of companies or websites that claim they will give you your credit score frequently to help with rebuilding credit score issues, but often they will not be entirely accurate. Stick to the major agencies for correct reporting.
Best Way to Rebuild Credit #2: Dispute Any Error
Next up on the best ways to rebuild credit is all about disputing. To start building credit quickly, look through the credit reports you recently received from the agencies to see if there are any errors on your report.
There are times where mistakes will make their way to your credit report. To rebuild your credit, you will need to make sure to dispute them to each of the reporting agencies.
You can dispute these errors to the three credit reporting agencies – Equifax, Experian, or TransUnion – online or by letter. While it may take time for these to be removed from your reports, eventually you will see your credit rebuilding.
This is the fastest way to rebuild credit without changing any spending or savings habits. So take the time to really look through your credit report.
Best Way to Rebuild Credit #3: Be on Time
The act of rebuilding credit is showing future lenders/creditors that they can trust you. This means one of the best ways to rebuild credit is the tried and true method of paying your bills on time.
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For some people, paying on time is difficult because the money is not there. Ways to help combat this problem so you can rebuild credit fast are to:
- Call to see if you can have your minimum payment lowered
- Pick up a temporary second job until you rebuild your credit
- Ask somebody for a small, short loan to pay your bill on time and pay them back immediately
For other people, paying on time is difficult because they forget. Ways to help deal with this problem so you can rebuild credit quickly are to:
- Add alarms to your phone and computer
- Ask a friend or family member to be your rebuilding credit accountability partner
- Set up electronic bill pay when the option is available
Best Way to Rebuild Credit #4: Pay Down Debt
Now, let’s look at one of the best ways to rebuild credit that may not be the most enjoyable step: paying off your debt.
Paying off your debt does wonderful things for the process of rebuilding credit score issues:
- Credit utilization is a factor in credit rebuilding. If you are using up too much of your available credit, your score will reflect that negatively. Paying off debt allows for better credit utilization.
- When you are not in too much debt, you will more likely have access to money to pay off all your bills each month on time.
Start by getting up-to-date on behind payments. Then, focus on bringing down your debts with extra payments throughout the month. As you do this, you will be getting a handle on your debt while rebuilding bad credit at the same time.
Stop making big purchases during the time you are rebuilding your credit. Use that money to pay your bills on time and then to pay down existing debt.
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Best Way to Rebuild Credit #5: Do Not Close Cards
A common mistake people make when trying to rebuild credit is to close their credit cards. While this is often done with good intentions, it can actually harm the process of credit rebuilding.
One of the best ways to rebuild credit may seem counterintuitive, but you should actually keep your credit cards open.
Keeping your credit cards open will rebuild your credit by doing the following:
- Showing a long history
- Showing a mix of account types
- Showing a higher rate of available credit
Simply because you are keeping it open to help rebuild credit, however, does not mean you should still use it. After all, another one of the best ways to rebuild credit is to cut up your credit card so you aren’t tempted to use it.
Best Way to Rebuild Credit #6: Get Credit-Building Loans
Once you have started implementing the good financial habits that can help rebuild your credit, you can consider opting for other outside methods for building credit back up.
One of the top ways to rebuild credit in this way is to get a credit-building loan.
Most loans are for people who already have good credit, but these options are specifically for people who need the fastest way to rebuild credit.
These credit-builder loans will not actually be money for you to use; it is deposited into a savings account. This way, the lenders are not risking anything while you are rebuilding bad credit.
Once you pay off the loan according to the plan you set up, you will get the money and they will report your good payments to credit reporting agencies to rebuild your credit.
Best Way to Rebuild Credit #7: Apply for a Secured Credit Card
A great tip for both building credit for the first time and rebuilding bad credit is to apply for a secured credit card. Since many people with bad credit cannot qualify for a regular credit card, this gives you a viable option.
Secured credit cards exist for the sole purpose of helping people build or rebuild credit fast. They are the fastest way to rebuild credit by using credit. When you are approved for a secured credit card, you put up your own collateral deposit until you rebuild credit. This money will be your “credit limit.” For example, you may put $250 toward that card and are then able to charge up to $250.
You can then use the credit card for purchases you already have to make. Then, you will pay off the balance each month. This behavior will be reported to credit card reporting agencies so you can rebuild credit.
Best Way to Rebuild Credit #8: Learn About Money
Learning solid financial practices is not only one of the best ways to rebuild credit at the moment, but also one of the best ways to keep your credit excellent for the rest of your life.
There are many resources and programs out there that can teach you money management and budgeting tools that will help you keep up your building credit habits.
One popular option is Dave Ramsey’s baby steps, known for helping people get out of debt and gain financial freedom. His podcast is free and covers many topics dealing with personal financial struggles, including building credit back up.
Conclusion: Rebuilding Credit Today
Now that we have gone over some of the best ways to rebuild credit quickly, it is up to you to start implementing them in your own life.
Look through our list of tips for building credit and see which area will be the fastest way to rebuild credit for you and start there. Then, keep adding from the other best ways to rebuild credit. Before you know it, you will rebuild credit fast.
It may not feel like much fun to deal with the habits of rebuilding credit, but the results will be worth it. Financial freedom is just around the corner when you make it your goal to rebuild credit this year with some of these many ways to rebuild credit.
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