We can all make mistakes with our credit. Sometimes 
your credit is impacted by something unplanned, like a job loss, health issue or sudden emergency. Sometimes, you lose track of your spending, or fail to make consistent payments. No matter what the reason, if you owe more than you can pay back in a timely manner, your credit score will take a hit.
Thankfully, with a solid plan, persistence and a little time, you can rebuild your credit. Here’s how to start rebuilding your credit score today.
- Make a budget you can live with. After examining your credit report and getting a clear idea of your credit situation, it’s time to buckle down and budget! Calculate how much you can afford to pay each creditor and pay as much over the minimum payment as possible. If you’ve found yourself with an overwhelming amount of debt that you are struggling to pay back and have missed timely payments, you can find many resources online, like Dave Ramsey’s Debt Snowball Method that could help you come up with a game plan to pay off your debts.
- Reform your payment and spending habits. As you work on repayment, make every payment on time. Set up automatic payments or set an alarm in your digital calendar to remind you to make a payment at the same time each month. Additionally, try not to open new lines of credit or add to your debt. However, don’t close credit cards that are no longer in use or paid down, as that dings your credit, too. You ideally want to have longstanding open lines of credit with little to no balance each month. This shows lenders that you can accrue and pay back your debt timely and responsibly.
- Try a secured credit card. If you are trying to rebuild your credit or were not able to get a credit card in the first place, a secured credit card is a great place to start. Secured credit cards use your savings on deposit as collateral. Generally these are small lines of credit, so it’s unlikely you’ll get in over your head. If you’re wondering how to rebuild credit in a low-risk way, this is a good option.
- Aim for a debt-to-available-credit ratio of 30 percent. The more you use of your available credit, the worse it looks for your credit score. So if you have a total credit availability of $20,000, and you use $10,000 of it on your last vacation and stylish new bedroom set, your debt-to-available-credit ratio is at 50 percent. Ideally, you want to use 30 percent or less of the credit you have available to you.
Take heart—while negative information shows on your credit report for several years, so does a history of trying to rebuild your credit. If you want to know how to improve your credit score, try following the tips above and you’ll begin to see improvement sooner than you might expect. You can rebuild your credit and Mission Fed is here to help you!
Do you need to skip a loan payment? Learn about the Mission Federal Credit Union Skip-a-Pay offering for current members.
The content provided in this blog consists of the opinions and ideas of the author alone and should be used for informational purposes only. MisMission Federal Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article by MisMission Federal Credit Union is for the information and convenience of its readers and does not constitute endorsement, control or warranty by MisMission Federal Credit Union.
