4 Steps to Rebuilding Your Credit

There are a million reasons why someone may have a poor credit score, from addiction and mental health issues to credit card or medical debt. However, the effects of having bad credit are the same. It prevents people from making major necessary purchases, adds thousands in interest to bills, and pulls people into a cycle of poverty.

There is a way out. But the first pre-step to rebuilding credit is tackling the behaviors that perpetuate your debt. Your financial situation won’t change unless you do. But if you follow this quick guide, you’ll be on your way to improving your financial and mental wellness.

1. Pay Your Bills On Time (Every Time)
Late or missed payments are the #1 factor that tanks credit scores. Our advice? Once you’ve been paid, don’t wait to pay any bills due for that pay period even if they’re not due until later. Prioritize especially those with higher interest rates and then you’ll be glad to know the remainder in your account is actually available to spend.

2. Lower Your Credit Card Debt
Obviously it’s good to pay down debt, but it looks particularly good to credit companies when your credit card debt is less than 30% of your overall limit. Try not to close the accounts because that will lower your available credit. Just aim to pay them down and always do more than the minimum monthly payment.

3. Consider Debt Management Solutions
If your debt is substantial, there are many avenues you can choose from, such as a debt consolidation program. It combines all your debt into one lower-interest loan so you only have to make one payment. (This is less feasible if your credit is lower than 670.) Debt forgiveness could be an option as well, with several credit companies that grant a reduction in what you owe for those in more dire straits. If you’re in Arkansas, consider InCharge Debt Solutions.

For those with debt in collections, removing those blemishes from your credit will help greatly. Contact the agency holding your debt and many will calculate a lower lump sum for you to pay on.

4. Avoid New Credit Lines/Purchases
Hard inquiries (instances where an institution checks your credit before granting a loan, like when buying a car) negatively impact your credit report. Avoiding new debt and inquiries on your credit report will help your score, though they do drop off after two years.

Sources:
https://www.incharge.org/debt-relief/solutions-for-gambling-debts/
https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/how-to-rebuild-