Rebuilding Your Credit

Many people see their credit scores take a dive due to financial hardships such as job loss or divorce. Knowing how important it is to have a good credit score, they then begin the laborious process of rebuilding their credit by making payments on time, managing their credit cards, and repairing their credit reports.

In such cases, rebuilding your credit can be a great idea. But if you’re trying to improve your credit score, make sure you understand how credit reports and credit scores work. It’s possible to do more harm than good if you don’t know what you’re doing, so avoid these common mistakes as you rebuild your credit:

  1. Stay current. Making your payments on time is one of the most important actions you can take to improve your credit score.
  2. Don’t start closing accounts or canceling cards. Longevity counts as a positive indicator on your credit score. If you have cards that you’ve paid off or aren’t using anymore, it usually benefits your credit score to keep them open. It’s also a good thing for your credit card utilization ratios to reflect more credit available to you than you’re using. So try to avoid “maxxing out” your cards. Remember that closing accounts can actually cause your score to go down temporarily if you close too many or if the one you close reflects a lengthy credit history.
  3. Hire a credit repair service. People working to rebuild their credit may think they have to wait countless years for their credit scores to start to improve. This is because, regardless of the amount of good credit you have on your credit reports, any amount of bad credit can lower your credit score. Hiring a professional law firm to help you address the questionable items on your credit reports can be an excellent method of improving your credit score and rebuilding your credit.
  4. Don’t give up. Whether you’re just trying to pay down overused cards or are going through the process of disputing errors on your credit report, the steps to rebuild credit usually doesn’t happen overnight. Be patient and remain diligent. Your efforts will eventually pay off in the form of an improved credit score.