3 Ways to Build Your Credit After a Financial Setback

build your credit

Even though the average credit score is going up and now stands at 714 for 2021, some people still have slip-ups. Even small mistakes like missing a payment too often can make good credit go bad.

So, how do you build your credit after a financial crisis that significantly makes your credit score drop?

Follow these three simple tips to get back on track.

1. Pay Bills on Time

Part of your good credit ranking is based on whether you pay your bills on time. Ensuring that you are never late will, over time, rebuild your credit.

Set your payments to automatic and add a reminder on your phone to make sure you are prepared each month. You can also create an expense and income spreadsheet for the month. This will show your budget and whether you need to cut back on expenses or find other sources of income to pay your bills.

2. Apply for a New Credit Card

Sometimes building credit means adding more credit. However, you want to proceed with caution and use another credit card to your advantage.

Do this by getting a lower interest credit card and then transferring higher interest debt to reduce your monthly payments. You will save money by paying less interest in the long term.

Be sure to leave your old credit card open to create longevity and improve your credit score. Closing credit cards will lower your credit score even if you resolved your debt.

A secured credit card also helps build credit by ensuring you always have money to pay off your monthly credit card bill. It works by requiring a deposit in the amount of your credit limit. If you cannot make a payment then the amount deducts from the initial deposit.

Read on here about secure credit cards and other ways to safely get cash for the things you need without negatively impacting your credit.

3. Get a Small Personal Loan

An easy way to remove bad credit is to show that you can pay off a loan. A personal loan helps credit building by giving you cash to pay bills and buy essentials, but it is not overwhelming for you to pay back.

A small personal loan usually has lower interest rates than credit cards especially if you apply with your bank or a secured lender. Set a repayment period that is based on your budget and never miss a payment.

Loans also help you consolidate your debt, which reduces your interest paid over time.

Start to Build Your Credit

There is no better time than now to build your credit. The longer you wait to reduce your debt and display responsibility to creditors the longer it will take to improve your credibility.

Start with the easy steps above to greatly impact your credit score. You should see results in as little as a few months.

Visit our Investment section for smart ways to increase your income now that you are saving money on interest and reducing your debt.

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