It's crucial to rebuilding your credit in order to get approved for future credit cards, loans, and even to have lower interest rates. If you're struggling to find a bank that will approve you for a credit card while you rebuild your credit, consider getting an unsecured card for bad credit. As you rebuild, you can start to make significant process quickly, as long as you put forth the work.
Here are four solutions to improving your bad credit.
1. Make Payments On Time
Two of the most common scoring systems, FICO (NYSE: FICO) and VantageScore, consider payment history as one of the most influential factors. Your ability to pay your bills on time is reflected in your credit score. Once you have established a history of timely payments, it can help to improve your score and prove that you can handle future debts responsibly.
Avoid late payments, repossessions, foreclosures, defaults, and third party collections. Filling for bankruptcy can also indicate your inability to handle debt properly and can harm your credit score.
2. Monitor Your Credit Card Utilization Rate
Look at your credit limit and how much of it you are using every month. You want to ensure you aren’t using too much available credit because that could indicate risk to lenders. Credit utilization influences your score, and your ideal rate will vary depending on what scoring system is used. However, by keeping your utilization rate below 10%, you can ensure that you will score well on every scoring system.
3. Leave Paid-Off Debts On Your Report
Once you finally finish paying off a car loan or student debt, you might want to wipe the old debts off your report immediately. Instead, you might want to consider leaving it on the report, as long as the payments were timely and complete. That debt and the strong history of payment can help your credit score because it indicates that you are responsible.
4. Don’t Apply For Too Many Credit Cards At Once
When you apply for a new credit card or loan, a hard inquiry is pulled on your report. This can cause your score to lower for anywhere to six to 12 months. Therefore, before you apply to a new line of credit, research to see how likely it is that you will be approved. The last thing you want is for your credit to get lowered for a denied application.
If you know you will need to take out a large loan, like for a mortgage or car, it’s best to not apply for any credit cards within the prior months. Try to keep the hard inquiries to a minimum by making a mortgage, auto, or loan rate comparisons within a short period.
Unfortunately, all of these solutions take time. But as long as you are patient, you can start to see your score rise over time.
MoneyLion has entered into a compensation arrangement with Benzinga under which MoneyLion pays a fee for marketing and advertising services. MoneyLion does not have editorial control over the content of this material.
See more from Benzinga
- Online Loans: Expectation Vs. Reality
- Do You Make These Common Credit Card Mistakes?
- 4 Ways To Use Your Credit Rewards
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.