How to rebuild credit – Follow these 10 Steps


Having a good credit score is important when buying a home, having a family and taking those next steps in life. Most people are not aware that they have a bad credit rating until they go to apply for a credit card or a mortgage and are either rejected or are offered a bad interest rate.

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This makes them ask; so how do I improve my credit rating?

In order to rebuild you credit and take those next steps in life you need to firstly know your credit score. There are plenty of free credit reports you can use; such as Noddle, ClearScore and Experian.

Once you identify your credit score, you then need to try and improve your credit score. If you currently have debts, try and pay them off. For example, if you have a credit card bill try and pay it all off.

However, if you are unable to do this, call the company and try to arrange a payment plan to pay it off. This is similar to catalogue debts, be wary of signing up to catalogues such as very, as you may be liable to pay interest on your purchases if they are not paid off immediately. Arrange to pay off all outstanding debts as soon as you can, or arrange a payment plan to ensure you pay off your debts. This will help your credit score increase.

It sounds simple but it is effective advice. Pay your bills on time. If you know how much you are earning each month and how much your bills will be, try to arrange a direct debit to come out of your account in order to pay your bills on time.

Direct debits are effective as you can set them up to come out on the day you are paid so you don’t forget to pay your bills, and it also avoids you spending all of your money and not being left with not enough money to pay off your bills.

If you have a credit card account, keep it open. This is to ensure that you have a long-standing credit history, therefore a better credit score. If you do have credit cards and you are using a great deal of your available credit, it may count against you.

Create a financial plan to decrease your debt faster. Honestly evaluate your expenses; do you need or want that purchase? Purchasing the necessities will cut your spending and allow you to save to reduce your debt. Try to get your credit use to 30% or less of the amount you have available. If you reduce your debit, your credit score will improve.

Another good and important way to rebuild credit is to use a secured credit card. A secured credit card requires that you keep money in a linked savings bank account as collateral. Secured credit cards are easier to get because you give them the savings account link as collateral, so even if you have poor credit its easier for you to get approved. It is important to show that you pay regularly and on time, as these are reported to the bureaus every month.

An unsecured credit card carries more positive weight, but you might not qualify for an unsecured card right now. If this is the case, begin using a secured credit card.

However, ensure that the card is truly a credit card and not a prepaid debit cards. You need to ensure that the secured card payments will be reported to bureaus because you should only use a card that will reported.

Once you have had the secured card for a while, ask if your bank if your secured card can be changed to an unsecured card. If you stay within your balance, and make your payments on time, you should be eligible. This will give your credit score a bit of a boost.

Remember, credit cards are not an excuse to spend more money! It is not “free money” you must ensure you pay off your credit card debts. This is a change of your spending habits to build yourself a good credit score.

It can take a while to rebuild your credit; you have to start by practicing good financial habits. Start by living within your means, setting aside money for savings and an emergency fund. Credit improvement does not happen overnight. Depending on your circumstances it could take a while but stick to it and you shall be rewarded with better rates and money in savings accounts.


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