Steps to Rebuild a Really Bad Credit Score

It is common knowledge that you cannot make any serious commitment, like buying a home, or even applying for credit, until you’ve successfully repaired your credit. This is especially true if you’ve had any major negative activity on your credit report.

Though repairing credit usually takes a while and requires a lot of patience, there are several steps that you can take to repair your credit today. Here are four steps to get you started.

Do a free credit report

The most important thing you can do to improve your credit is to obtain a free credit report every 12 months from each of the major credit bureaus, Experian, TransUnion, and Equifax. A simple search on Google will also give you lots of results from many different sources from which you can obtain your credit score, so do a bit of research. The important thing to remember is working towards an understanding of different credit scoring systems, the aggregation of which inevitably leads to the path to rebuilding your credit score.

You also want to check your credit report frequently to look for any mistakes that might be undermining your credit. If you notice a mistake that has taken place in the past 12 months, you can dispute the entry. It’s also worth noting that if you dispute the wrong report, that has to be fixed before you can have another one filed.

If you don’t find any issues, or you need help interpreting the results, you can have your credit report updated with “hard” inquiries to see what changes you’ve made. This can help you identify any positive changes and how they’ve impacted your credit report.

Start small

It can be easy to get discouraged if your efforts to repair your credit don’t seem to be paying off quickly. That said, you shouldn’t get discouraged. Remember that even a small increase in your credit score can add up over time. It might not be too long before your credit score is at a point where you’re ready to start looking for the right home or car loan.

Look into new credit

If you have several credit cards, you might want to consider a balance transfer card. With a balance transfer card, you pay off your old credit card, and then use the new card to make new purchases.

Many credit cards offer low introductory offers for balance transfers, usually of 3% to 6% for the balance. Of course, you will likely pay an extra balance transfer fee, but if you have a large debt, such as a credit card with a $10,000 balance, a 3% balance transfer may make sense.

Put it on automatic payments

Establish the habit of making payments on time. The most obvious way to do this is to set up automatic payments for your debts.

If you have multiple debts, consider setting up a schedule so that a payment is automatically debited from your account each month. If you don’t have a lot of debt, you could set up your credit card payments to be automatically debited from your checking account at the beginning of the month. Alternatively, if you’re already keeping your balance at or below 50% of the credit limit on each card, you might simply set up your automated payments to go to one or two accounts at a time.