3 Tips on How to Rebuild Your Credit

3 Tips on How to Rebuild Your Credit
Grayson Bell
By: Grayson Bell
Posted: August 27, 2013
Experts share their tips and advice daily on BadCredit.org, helping subprime consumers navigate the world of personal finance.

There could by a myriad of reasons why you have bad credit.

You may have made poor financial decisions. You may be stuck with a mortgage you are unable to pay. It may be that you lost your job. You may have excessive medical bills. The list can go on and on.

I feel bad when people are dealing with financial trouble. I know the only thing they should really do is focus on the future.

If you want your future to have good credit, then here are some tips on how to rebuild your credit.

1. Realization.

This tip is probably the simplest of them all to understand but the hardest to act on.

If you have bad credit, then you need to realize why you have it. What happened in your financial life that caused you to have bad credit? 

Whatever the reason, you have to own up to it. If you made a mistake in the past, avoid making it again.

I understand this tip might be general, but I do not know exactly why you have bad credit.

I do not know what happened to you, but I do know the difference between people who succeed and people who fail is how many times they make the same mistake. Just think about that for a minute.

2. Put on your construction hat.

I bet you did not know you were going to be doing some construction work, did you? I am not asking you to build a house. This type of construction comes with credit rebuilding.

You have come to the realization of why you have bad credit, so now you need to start rebuilding it.

The first step is to make sure you do not have any more debt.

Yes, there are different types of debt. No matter how many wigs we put on it, it is still debt. Debt is crippling and can really bring you down emotionally.

If you want to get ready for the roller coaster ride we call rebuilding credit, then you need to make sure you have your debts paid off. Having them paid off will help you in the long term.

The next step is to get back on the credit card train.

Why would you want to get a credit card? The answer is simple: Credit cards are a great way to increase your credit score.

While credit cards are not the only way to increase your credit score, they tend to be the easiest.

It can be difficult to get a credit card. People with bad credit rarely get approved for an unsecured credit card.

Examples of unsecured cards are the offers that come in the mail. Individuals with bad credit need to look at secured credit cards.

A secured credit card acts just like a regular credit card. You can carry it in your wallet or purse and you can swipe it at most stores.

“We are not able to change the past,

but we have total control of the future.”

The big difference between a secured credit card and an unsecured credit card is that a secured credit card requires you to put up cash as the collateral for your credit limit.

For example, if you have $500, then you would need to put that cash up as a deposit and your credit limit would be $500.

You still have to make payments on the card, but the cash is there to protect the issuing bank.

  • Start small

People with bad credit have to start somewhere, and secured credit cards are a great place to do it. Research to ensure you are getting a good deal and that you are not paying a lot of fees or interest.

If you have bad credit, then you should expect to pay a higher interest rate. You should also expect that there will most likely be a fee to have the credit card. This is the cost of rebuilding credit.

I would suggest putting a low credit limit on your card and then use it only for small things. Always pay off the card every month. There are no exceptions to this rule!

  • Watch your back

I am sure you have seen all of the places you can get a credit card, even if you have bad credit.

There are thousands of websites touting that you will always be approved, but why do they offer these deals? Make sure to read the fine print.

There are many businesses out there that are only looking to make more money. Charging high interest rates and fees are a great way to do that.

There are good banks that want to truly help people with bad credit rebuild their credit, but you have to find them.

My advice is to research, research and research more. Take your time finding an issuer that will give you what you want and not charge you an arm and a leg.

This is a very important step when looking for a secured credit card.

  • Think outside the box

When you are trying to rebuild your credit, you do not have to just go with a secured credit card. You should think outside the box and use other methods as well.

If you rent your home or your apartment, did you know you can have your rent payments reported to Experian?

This is a growing trend. The easiest way to do this is to work with a company similar to WilliamPaid.com. You pay your rent through the site and they report your payment history to Experian.

It is a novel idea that is really gaining steam.

Another way to rebuild your credit is to get a credit rebuilder loan. There are not many places that offer these, but they are usually offered through a credit union.

It is not your typical loan, but your payments can still be reported to the credit agencies.

The loan amounts are small and rarely more than $1,000. The money is put into an interest-bearing account with the credit union. Then you make monthly payments on the loan.

Once you have paid the loan off, the credit union releases the funds, plus the interest it made.

Now that is thinking outside of the box!

3. Have patience.

You must be thinking, “Seriously? Patience?” I know you want to get moving on with your life. You do not want to have to wait. Unfortunately, rebuilding your credit is a long process.

On average, it takes about a year before you will see any noticeable changes to your credit score. This can be a long time, but you just have to stick with the process.

There are many places that will sell you the pipe dream of increasing your credit score in 30 days. These places are typically a scam. If someone offers this to you, turn around and walk away.

You have to build your credit the hard way, through hard work, determination and the sheer power of your will.

You will get there, but the road might be bumpy, curvy, slippery and sometimes under construction.

Photo: www.thefrugalpath.com.