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6 Simple Ways to Rebuild Your Credit Score

4 min read
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Whether you had a recent late or missed payment or there was a change to your credit limit or usage, there are plenty of reasons your credit score may have dropped. Here are six ways to focus your efforts and start rebuilding your credit score.

1. Review your credit reports for inaccuracies.

Improving your credit score starts with a careful review of the information found in your credit reports from the three nationwide credit reporting companies: Experian, Equifax, and TransUnion. You can get a free printed copy of each of your credit reports every 12 months at AnnualCreditReport.com. Equifax offers six additional free credit reports every 12 months, through December 31, 2026. When you visit the site, you may see steps to view more frequently updated reports online which gives you greater ability to monitor changes in your credit.

Carefully review your reports for inaccuracies such as incorrect account status, accounts listed twice, inaccurate credit limits and payment history, someone else’s information mixed in with your file, or other concerns. If you find inaccurate information, it may be bringing your score down. If you do, file a dispute both with the company and with the credit reporting agency.

2. Pay your bills on time.

Your payment history is one of the most important factors in determining your credit score. Even one late or missed payment can have an impact. Credit reporting companies generally report most negative information for up to seven years, so it’s important to have a system (like auto pay) in place to ensure you pay on time each month. If you have any past due accounts, bring them current as quickly as possible, and make it a priority to make your payments on time each month going forward.

3. Leave your old credit accounts open.

Once you pay off a credit card balance, it’s natural to consider closing the account—especially if you’re attempting to curtail a history of overspending on credit cards. However, if it’s a card you’ve had open for a long time or that has a high credit limit, it may help your credit score to keep it open. Closing a card account lowers your total available credit. This can lead to a higher credit utilization ratio which can have a negative impact on your credit score. Of course, if you have a compelling reason to close a credit card account (such as due to a high annual fee), you don’t have to keep it open, but keep in mind closing it may affect your credit score.

4. Keep your credit balances to 30% or less of your available credit.

Ideally, you’re able to pay off your credit card balance in full every month to avoid finance charges. However, if you carry large balances from one month to the next, it could signal a problem with how you’re using credit. Because carrying high credit card balances can indicate a higher credit risk, when you’re rebuilding your credit, experts recommend using no more than 30% of your total credit limit on any card. Using less is even better.

While using a debit card doesn’t help rebuild your credit, you might consider reaching for one instead of a credit card when you need to make a purchase, especially if that debit card offers rewards.

5. Avoid multiple applications for new credit.

Applying for too much new credit (hard credit inquiries) in a short period of time could be seen as a sign you’re trying to take on more debt than you can reasonably manage. Opening new credit also lowers the average age of your total accounts, which lowers your length of credit history and may adversely impact your credit score. However, if that new credit is for debt consolidation and reduces high interest debt, this may have a positive impact on your credit score.

If you need to apply for more credit while you’re rebuilding your credit score, be strategic about when, how, and who you apply with. If you have a close friend or relative with good credit who is willing to add you as an authorized user on their credit card, or cosign on an auto or personal loan with you, it may help you qualify for better terms and interest rate and potentially have less of an impact on your credit score overall. Another alternative is using a secured card. With most of these cards, you start with a small credit line and you put an amount equal to it in an account as a deposit. It may be another way to help you establish a credit record.

6. Maintain a diverse mix of credit accounts.

Building and maintaining a variety of credit accounts (such as credit cards, mortgages, and installment loans) demonstrates well-rounded and responsible credit usage and contributes to a more comprehensive credit profile. Over the long term, having a diverse mix of credit accounts is worth taking into consideration as you rebuild your credit. Taking a balanced and calculated approach to borrowing and showcasing financial competence through your ability to manage different types of credit and repayment terms can have a positive impact on your credit score.

Generally, it might take several years to establish a well-rounded credit profile with a mix of different types of credit accounts. With patience and consistent responsible credit management, you can successfully build and maintain a diverse credit profile over time.

The Bottom Line

Rebuilding your credit score is a gradual process that involves adopting some simple yet effective strategies. By consistently paying bills on time, reducing credit card balances, watching your credit utilization, and diversifying your credit mix, you can lay a strong foundation for improving your credit score over time. Monitoring your credit report for errors and practicing responsible credit behavior will further contribute to improving your credit score. While the journey may require patience and persistence, the result of a healthier credit score can open doors to better financial opportunities and greater peace of mind.

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