In yesterday’s post, I went over Your Credit File: Do It Yourself Tips to Improve Poor Credit. In case you missed that post, please go back and read it because there is a lot of helpful information that you will need to know if you are trying to rebuild your credit.
How To Rebuild Your Credit Score
According to About.com, there are 4 ways you can start to rebuild your credit score:
- Start by getting new credit to begin establishing a new credit history.
- Build new credit habits
- Pay everything on time – only buy what you can afford and realistically pay off each month
- Replace bad credit with good credit – Charge what you can afford and pay off your bills each and every month – and on time! This will show your creditors
As I mentioned in yesterday’s post, there is no quick fix for reestablishing your credit history. It takes time and making sure you pay your bills on time each month to show your creditors you are responsible with your spending. The time to rebuild your credit score can vary. According to Experian:
Actually, you don’t rebuild the credit score. You rebuild your credit history, which then is reflected by your credit score. The length of time to rebuild your credit history after a negative change depends on the reasons behind the change. Most negative changes in credit scores are due to the addition of a negative element to your credit report, such as a delinquency or collection account. These new elements will continue to affect your credit scores until they reach a certain age.
- Delinquencies remain on your credit report for seven years.
- Most public record items remain on your credit report for seven years, although some bankruptcies may remain for 10 years and unpaid tax liens remain for 15 years.
- Inquiries remain on your report for two years.
Secured Credit Card vs. Prepaid Credit Card
If you are trying to rebuild your credit, one way to do this is is through a secured or prepaid credit card. Here are the differences between the two:
A secured credit card is a credit card offered by a bank or other credit company in exchange for, or secured, by collateral. While many credit cards require an individual to have an average or above credit score, a secured credit card can be acquired even when an individual has a poor credit history or no credit at all. Source
A prepaid debit card also has a credit line equal to the amount on deposit with the card company, so it is a pre-funded credit line rather than a borrowed credit line. Debit cards draw funds from a bank checking account and prepaid credit cards draw funds from the money “loaded” onto the card beforehand. Source
Credit Card Suggestions
If you are looking for a credit card to help you start rebuilding your credit, here are two credit cards that will help with that:
Lessons Learned: Remember to only take on as much debt as you can pay off when you are trying to rebuild your credit. And make sure you make your payments on time each month!!
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