How to Rebuild Your Credit With USA Credit
American consumers can rebuild credit history using American credit card brands such as MasterCard, American Express and Diner's Club as well as U.S. bank and retail credit cards. By paying down a line of credit and then implementing a specific course of action, you can regain control of your financial history and make purchases that help--not hurt--your credit report and score.
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Instructions
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Purchase a copy of your credit report and score from each of the three consumer reporting bureaus. Review your credit reports and determine how much repair is necessary. Repair is based on your delinquency rate. For example, a score of 300 has an 87 percent delinquency rate, which is poor.
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Contact each consumer reporting bureau and submit a dispute form requesting the deletion of older credit accounts. Fixing an error on your credit report may cause your credit score to immediately increase. By law, potentially negative accounts can only remain on your account for up to seven years.
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Negotiate a lower interest rate with your creditors and, if necessary, a reduced payment plan. Lowering your interest rate can save you money each month. Reduce your minimum payments if you are struggling to make your monthly payment on time.
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Pay down each line of credit to within 30 percent of the maximum limit. Pay down each line of credit in descending order until your utilization rate is favorable. The lower your credit balance goes, the more favorable your utilization rate. Start with higher interest accounts first to save on interest costs.
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Retain your credit accounts, which must remain open throughout the credit restoration process. Shrinking your lines of credit can hurt your credit score.
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Apply for new credit in the future. Slowly start to apply for new lower interest credit accounts as your credit score increases. Major American credit card brands offer low to high lines of credit. Apply as directed. If you cannot immediately obtain new credit, opt for prepaid credit cards and secured credit cards to boost credit. Secure your line of credit with an asset such as an auto title.
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Tips & Warnings
Licensed credit counselors are available to assist you with your debt management needs.
Aim to only charge as much as you can repay at the end of the month, so your debt-to-income ratio is minimum, which boosts credit, or keep your balance within 30 percent or less of your credit limit.
Rebuilding credit does not happen over night.
Charging a high balance can hurt your credit score, regardless of whether you pay your minimum or total balance each month.
Creditors report your end-of-billing cycle balance to all three consumer reporting companies. Your monthly balance is then used to calculate your updated credit score. If you must charge a high balance, pay if off days before your billing cycle closes to prevent a drop in your credit score.
References
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