Having a good score is always good either on the scoresheet or the credit score! In the world of credit and debt, someone with a bad credit score is not acceptable for many benefits in the financial sector. So, if you have low credit, we are going to provide you with details as to how to rebuild your credit in 5 steps. Follow these steps to ensure a good credit score.
Rebuild Your Credit in 5 Steps
Fixing or rebuilding your credit requires analyzing and careful observation of your expense. If we analyze them carefully, these are the following five steps:
- Know what your credit score is.
- Review your credit report and fix any issues or errors.
- Make sure to have a sound credit account to reach credit scores.
- Keep control of your credit utilization, neither less nor more.
- Do focus on the age of your credit.
1. Know your credit score
To fix something, one has to know where the fault is. Therefore, to rebuild your credit score, you have to know your FICO score or credit score. To know your score, you can get them from the Annual Credit Report. Below are the details you will get in your score report: Basic details such as name, birthdate, address, etc. A credit score consists of 5 major areas, which are Payment history, Credit Utilization, Credit history length, Types of credits, and credit inquires with 35%, 30%, 15%, 10%, 10% weightage.
2. Fix errors
Fixing an issue can be done on your own, or you can consult a professional credit repair company. The error can be disputed online, by mail or by phone on any of the reports of Experian, Equifax or TransUnion. Be clear about your disputes while contacting the agencies. If you are not able to resolve the issue on your own, ask for help if needed.
3. Maintaining Sound Credit Accounts
Payment history is your main part of a FICO or credit score, which accounts for 35% of the credit score. One late payment can lower your scores significantly. Try to have a good payment history to have a good credit score. A negative score does not age off easily. In many cases, it is for seven years.
4. Control Credit Utilization
Credit utilization is the quantity of debt you utilized from your credit limits. Going beyond your credit limits might reduce your score drastically. Ideally, it should be 10% of your credit limit, but one can utilize your credit up to 30% of your limits. If you exceed using more than 30%, you are more likely to have a small decrease in your credit score.
5. Focus on the Age of Your Credit
Credit age accounts for 15% of the credit score, so make sure your card is active. The average age of all the accounts and the age of your oldest account are the two terms used for calculating the age of the credit.
Avoid Closing the Oldest Account
Open a credit card if you don’t have a credit history, so at least the card will show up in your credit history.
Maintaining a good credit score is not easy but if anytime your credit score goes low, try to rebuild it again.