Finally Free Of Bad Debt? Tips On How To Rebuild Your Credit Score

Rebuild Your Credit Score

October 30th, 2021   |   Updated on March 17th, 2022

You’ve finally done it, you’ve freed yourself from all of your old, bad debt — congratulations!

Maybe you used the snowball method, or maybe you used the avalanche method, what matters is you made it.

Now you have the chance to start over better, smarter, and with more experience behind your decision-making. Even though you’ve cleared up all your bad debt, your credit score is still going to be a mess.

Since you are starting your credit upswing from a place of damaged credit, you may find that it’s a little more challenging to get your feet under you with new credit products.

This guide will give you a few tips to help you boost your credit score following a debt wash.

Pay Everything On Time

When you break down how both FICO and Vantage Score credit scores are calculated, a large influence in both is your payment history.

In some calculations, your payment history is considered one of the highest value metrics and can count for as much as 30% of the total score.

Be sure you pay your bills on time, every time. Watch your credit report to make sure that your payments are being properly reflected in your credit report payment history log.

Get A Secured Card

This is a great way for just about anyone to get a basic line of credit from major banks. Secured cards will extend you a line of credit equal to the security that is applied to the card.

For example, if the deposit is $200, you have a $200 credit line monthly that must be paid off, or the deposit is forfeit.

Keep Your Credit Utilization Low

Maintain open credit, but use it sparingly. A credit utilization ratio of 30% or less is ideal, so, for example, if you have $1,000 in total credit lines, be sure you only use around $300 in credit before paying it off.

Keeping your credit utilization ratio low shows lenders that you can responsibly manage your available credit, and pay it off.

Get A Secured Loan

A secured loan is similar to a secured card, with a little higher cost. A secured loan will place your deposit as a security against a loan that you make monthly payments on. When it’s paid, you get your security, plus interest in some cases.

Keep Up With Your Credit

It hasn’t been easy for you to get to this point. No matter how much debt you started with, you had to work to get it paid off or cleared.

That’s an investment of time at the very least and time and money in some cases. Don’t waste this opportunity to stay out of debt and restore your credit.

Keep up with your payments. Keep checking your credit report to make sure it is free of errors and that your creditors are keeping all information current.

By staying on top of it, you will maintain a better overview of your entire financial situation, and you’ll be the first to know when there are any discrepancies.