your can Rebuild credit tougher than starting from scratch. You’re trying to show lenders and credit card issuers that despite some past slip-ups or outright disasters, you’re very likely to make payments as agreed.
The right moves, such as paying your bills on time, can help reduce the impact of credit mistakes
Because you’re not starting with a clean slate, rebuilding credit usually takes longer than building credit. But the steps — primarily paying on time and using credit lightly — are largely the same.
1. Pay on time and keep balances low
Pay your bills and any existing lines of credit on time, every time. No single factor affects your credit scores as much as your history of on-time payments. If the problem is forgetfulness or disorganization, automate the payments. When you rebuild credit, you cannot afford a mistake like missing a payment.
If bills have already gone to collections, prioritize the ones where your account is still in relatively good standing.
If bills have already gone to collections, though, prioritize the ones where your account is still in relatively good standing. Collectors may make the most noise, but they aren’t your top priority.
The other big influence on credit score is how much of your available credit you use. It’s called credit utilization, and you want to aim for 30% or well below.
2. Get a secured credit card
If your credit card accounts were closed, you may need to start with a secured credit card. With this card, you deposit money upfront as collateral, but then it works like any other credit card. Make sure the issuer reports payments to all three major credit-reporting bureaus.
3. Get a credit-builder loan
As the name suggests, a credit-builder loan has one purpose: to help you improve your credit profile. You’re most likely to find one at a credit union or community bank. You’ll need to be a member or customer, and you’ll have to show proof of income and ability to repay. Your on-time payments are reported to the credit bureaus, and the money you borrow is typically released to you once you have fully repaid the loan. (Be sure you pay on time. A late payment would also be reported.)
4. Become an authorized user
You can ask someone to add you as an authorized user on a credit card. A few cards allow primary cardholders to set spending limits for authorized users, which could make someone feel more comfortable about adding you. You could also ask someone to add you without actually giving you a card or card number.
Becoming an authorized user won’t have a huge impact on your score because you aren’t legally responsible for debts on that account. Being an authorized user can also hurt your score if the account holder doesn’t pay the bill on time, so make sure you ask someone with good credit habits.
5. Get a co-signer
If you’re having a hard time getting access to credit, ask a family member or friend to co-sign a loan or credit card. This is a huge favor: You’re asking this person to put his or her credit reputation on the line for you.
If you’re late with a payment, the co-signer’s credit score may drop.
If you’re late with a payment, the co-signer’s credit score may drop. The co-signer may also be turned down for additional credit, since they’re responsible for repayment on this account. Use this option with caution, and be certain you can repay. Failure to do so can damage the co-signer’s credit reputation and your relationship. Rebuild credit.