How You Can Rebuild Your Credit
Did you know that you could be paying more for your groceries, clothing, rent, or mortgage, credit card interest rates and utilities because you have a poor credit score? Tired of wasting money on every single purchase just because of a 3 digit credit score? Stop wasting money; rebuild your credit which will improve your credit score. It is never too late to rebuild your credit, you can do it by following these 4 steps.
#1 – Improve Your Spending Habits
Your spending habits effect your payment history; your payment history accounts for 35% of your credit score. The first step towards improving your spending habits is to spend less than you earn; that way, you are more likely to pay your bills on time. Credit reporting agencies take prompt payment history very seriously. If you find yourself always paying your bills late maybe you should consider electronic payments. Late pays can effect your credit score for up to 7 years; that is 7 years of paying more for every purchase you make.
#2 – Got Debt?
The next piece of financial data that credit reporting agencies use to determine 30% of your credit score is your outstanding debt. They use a ratio comparing your outstanding debt to the amount of debt available to you. If your ratio shows that you have more debt than debt availability your credit score goes down. You can rebuild your credit by paying down your outstanding debt balances and never rebuild those balances back up.
#3 – Skip New Credit Card Offers
Ten percent of your credit score is based on the number of credit cards you have. Creditors label you as a high financial risk if you have too many credit cards. So when you are tempted to sign up for new credit cards because of the promotions they offer, stop and think about how it will negatively effect your credit score.
#4 – Be Mindful Of Your Credit History
The length of your credit history makes up 15% of your credit score. Therefore it is not in your best financial interest to close old credit cards because you then put a dent in your credit history. The longer your credit history the better.
You control your credit. It is your responsibility to monitor it and rebuild it when it drops. If you currently have a poor credit score, rebuild it by starting slowly. Be proactive; take one step at a time otherwise you may give up and then continue to waste money on everything you buy. With a little determination and focus you can change your financial habits.