Build Your Credit Score Back Up Using These 5 Tactics
Starting with your first credit card, everything you do that involves credit becomes part of your credit history. That's why when you go through something like bankruptcy, your credit score takes such a hard hit. It's on your record for several years but there are things you can do to help. To have a good credit history, you have to use credit responsibly. But what counts as using credit responsibly?
1. Check your credit reports regularly for errors
Credit reports can sometimes have mistakes. In a 2012 Federal Trade Commission study, about 25% of U.S. consumers identified errors on their credit reports that might have affected their scores. Checking your reports regularly can help you find and dispute any errors.
If you did, in fact, go through a bankruptcy, then make sure the accounts that were discharged in bankruptcy are reported as “discharged.” and that they have a $0 balance. Also, be sure to check that the bankruptcy filing date is correct. (The bankruptcy remains on your account for up to 10 years from this date, so accuracy is important here.)
Dispute any errors you find.
2. Become an authorized user on an account
This means that someone else — typically a close friend or relative — adds you to their credit card account. Your credit can benefit from their positive account history and on-time payments, and your own preexisting credit history won’t hurt theirs. You can use the credit card in your name, but you’re not legally responsible for paying it off.
The flip side? Your credit may suffer from the primary account holder’s bad credit moves, and it may be hard to get removed from the account. Consider this credit-building method only if you trust the person to be responsible with the account.
3. Get a Retail Store Credit Card
You'll eventually need to start using credit again in order to re-build your score. The problem is that you'll most likely have hard time getting approved for credit at first. Retail credit cards often have less strict credit requirements. That's why you may have a better chance of getting approved for a retail credit card than other types of major credit cards.
Be aware that retail credit cards typically have low credit limits and high-interest rates and can only be used in a specific retail store. If you go this route, keep in mind that you're using this card to help you build good credit, not to go on a shopping spree at your favorite store.
4. Make Your Payments on Time
This goes without saying but we will just in case... you must make your payments on time, every time. Don't let yourself get back to the place you were in financially. You've already gone through the draining process of getting your debt cleared, don't let this new fresh start slip away again. Continue to make your payments on time. Make it a habit by making a weekly payment even if your payment is small. It'll help you stay in the right mind frame of paying off your debt.