Your credit history can influence many parts of your financial life, including your ability to qualify for loans or rent a home. Employers may also review it as part of some background checks. If your credit score is lower than you’d like, there are practical steps you can take to rebuild credit.
CHECK YOUR CREDIT REPORTS
The first step to rebuilding credit is to see what’s in your credit reports. The three major credit bureaus are Experian, Equifax, and TransUnion. They compile much of the same information, but their reports can be different. You can obtain free credit reports from AnnualCreditReport.com.
Carefully review your credit reports and look for:
Incorrect personal information
Accounts you don't recognize
Payments incorrectly reported as late or missed
Incorrect account balances
Other inaccurate account information
Incorrect information on your credit reports could negatively affect your credit score. An account or transaction you don’t recognize could also be a sign of identity theft. If you find an error, dispute it with the credit bureau reporting the information.
Fibre Federal Credit Union’s My Credit Score lets members view their credit score and TransUnion credit profile through Online Banking or the mobile app.
PAY YOUR BILLS ON TIME
Loan, credit card, and other payment history can affect your credit score. On-time payments build a positive payment history; late or missed payments can hurt your score.
Fibre Federal’s free Bill Pay lets you schedule one-time or recurring payments and set payment reminders so important due dates don’t slip by.
If you can't pay your credit card balance in full each month, make at least the minimum payment by the due date to keep your account in good standing. If you’re having trouble making a loan payment, contact your lender as soon as possible to ask about available payment arrangements before you fall behind.
LOWER YOUR CREDIT UTILIZATION
Credit utilization is the amount of available credit you are currently using. For example, if you have a credit card with a $5,000 limit and a $2,000 balance, your credit utilization is 40% ($2,000 / $5,000).
A high credit utilization can negatively affect your credit score. Try to keep your credit utilization below 30%, if possible. If yours is higher, paying down credit card balances and limiting new charges can lower your utilization as you rebuild credit.
Paying down balances can also lower interest costs and free up room in your monthly budget.
KEEP OLDER CREDIT ACCOUNTS OPEN
The length of your credit history is another factor that affects your credit score. Keeping older credit card accounts open, even if you rarely use them, can preserve the length of your credit history. However, it may not be worth it if you have to pay an annual fee.
Closing an old credit card account could also affect your credit utilization. Closing it reduces your total available credit, which could increase your credit utilization and potentially lower your credit score.
If you keep an older card open, use it occasionally for a small purchase you would make anyway, such as gas or a subscription. Occasional activity may also lower the chance that the issuer closes the account for inactivity.
BE CAREFUL WHEN APPLYING FOR NEW CREDIT
If you apply for a loan or credit card, the lender may perform a hard credit check to assess your ability to repay what you borrow. A hard credit check may lower your credit score by a few points. Several applications in a short period could lower your score even more.
Checking your own credit uses a soft inquiry, which does not affect your credit score. Some preapproval checks also use soft inquiries.
As you rebuild credit, apply for new accounts selectively. This limits unnecessary hard inquiries and can also curb the temptation to take on more debt.
HOW LONG DOES IT TAKE TO REBUILD CREDIT?
There is no set timeline for rebuilding credit. How long it takes depends on where your credit currently stands and what caused your score to drop.
Fibre Federal’s My Credit Score tool is a helpful resource for tracking credit score changes.
Fibre Federal members can also use GreenPath Financial Wellness for financial counseling, credit guidance, debt management, budgeting, and more. The credit union’s many financial wellness and education resources offer additional tools to build healthy money habits.
START REBUILDING YOUR CREDIT TODAY
Rebuilding credit takes consistent habits, not a single quick fix. Focus on making positive changes you can stick with, from paying on time to keeping balances low, and track your progress along the way.
If a credit card is part of your plan, Fibre Federal has low-rate options to get your started off right. See current rates and card features before applying.