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Rebuilding Your Credit

Bad credit will limit your ability to get credit cards or a loan for a new house or new car. If you have bad credit, below are some tips for how to build credit and improve your credit score, which is important if you’re going to use online cash loans such as same day payday loans. Keep in mind that these techniques are not immediate fixes. Rebuilding your credit will take time, so be patient. The recommendations below will help speed up the rebuilding process.

Check your credit routinely. Treat it as a monthly check-up or simply add it to your to-do list when you pay your bills. Take a few minutes each month to review your credit scores, monitor your progress, and set your goals for the upcoming month. Learning how to build credit will come in handy when organizing future bills, payments and investments.

Your credit reports and scores are generated when they are requested. As soon as negative information is no longer reported or positive information is reported, your scores can change.

Pay attention to the obvious. When learning how to build credit most people tend to focus on larger items like judgments, charge-offs or other negative information. However, the personal information on your credit reports is also important so be sure to check for accuracy. An incorrect address or a misspelling of your name could indicate your credit information is getting mixed up with someone else’s. Check your personal information for errors since mistakes can happen.

Mark your calendar. The Fair Credit Reporting Act addresses how long negative information can remain on your credit reports. There are limits on how long negative information can be reported:

  • Late payments: 7 years from the date the payment was late
  • Collection accounts: 7.5 years from the date of delinquency on the original debt (leading up to collection)
  • Charge-offs: 7 years from the date charged off
  • Tax liens: 7 years after they are paid or satisfied
  • Judgments: 7 years from the date entered by the court if paid, possibly longer if unpaid
  • Repossession: 7 years from the date the repo occurred
  • Bankruptcy: 10 years from the date filed (Chapter 13 cases will be removed 7 years from the date of filing)
    Typically credit reporting agencies will automatically stop reporting negative information after the designated time period has passed. However, you should still check your credit reports 30 - 60 days after this negative information was supposed to have been removed from your reports to make sure it’s gone.

Watch out for credit report duplicates. Accounts that go unpaid can be sold from one collection agency to another. When that happens, the number of collection accounts and the amount owed can be inflated during that process. It may take time to identify which ones are legitimate, but when you do, you should dispute all of them except the most recent accounts as duplicates.

Try to bargain with debt collectors. Your credit scores will not be affected differently if you pay a collection account in full or settle the balance for less than the full amount. Many collection agencies are able to negotiate terms on the amount. If you do negotiate a deal, make sure to get it in writing. Paying a collection account won’t immediately change your scores. However, it will mean you can stop worrying about that debt and focus on other financial goals.

Remove your tax lien. If you pay or settle a tax debt that resulted in a tax lien on your credit reports, you may be able to get that lien removed completely from your reports. The same may apply if you enter into an installment agreement with the IRS. Find out if you qualify. If you do, your credit scores may improve significantly when the tax lien is removed.

Resume using credit. After running into credit problems, people tend to be afraid of jumping into the water and using credit again. While you certainly want to be cautious and avoid getting into trouble again, getting credit is essential to building your credit scores again. Recent, positive credit information can help improve your credit scores and can make a big difference as you fix your credit.

Use a secured card. Even with damaged credit, these cards should be easy to get because you provide a security deposit for the card. If you manage the account properly, you will get your money back when you close the account. Make sure to choose a card that is reported to all three major credit-reporting agencies so that your positive usage will help establish a new positive credit reference.

Don’t max out a credit card. Try not to use more than 10 – 25% of the available credit on an individual card. Using higher amounts of your available credit, even though you may pay it all off, may have a negative effect on your credit score.

Immediately dispute mistakes. If you find mistakes on any of your credit reports, you should dispute them right away. If it’s a serious one, you should send a letter rather than filing an online dispute so that you have more proof. Also, since the 3 major credit-reporting agencies don’t share information with each other, you’ll need to challenge the error with each of them individually.

Proceed with caution. When trying to rebuild your credit, one late payment can result in a big drop in your credit scores. Set up auto-payments for your bills or set up automatic reminders for each payment to be emailed / texted to you so you don’t forget a bill.

Please visit the following ConnectFinance resources for other information and tips on how to build credit and reduce your debt.

A "personal loan" is a financial product that provides consumers with a low amount, short-term cash loan. These loans are typically 2-3 weeks in duration and are not based on the borrower’s credit. Using a simple application, like the one on this website, personal loans provide borrowers with a financial option for quickly acquiring the money they need to cover small unexpected expenses.

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Installment loans are very similar to online personal cash loans in that it's a lending product that enables consumers to quickly acquire money needed to pay for immediate, and often, unexpected expenses. However, an installment loan is repaid over time based upon a set number of scheduled payments, instead of one lump sum like a personal cash loan.

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Auto title loans, also referred to as car title loans or cash title loans, are a type of secured loan where the borrower can use their vehicle title as collateral. Borrowers must allow a lender to place a lien on their car title, and temporarily surrender the hard copy of their vehicle title, in exchange for the loan.

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A line of credit loan is an online cash loan where credit is extended to individuals to be used as needed over a period of time. It uses a debit card to provide the credit, which the consumer uses for purchases.

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A line of credit loan is an online cash loan where credit is extended to individuals to be used as needed over a period of time. It uses a debit card to provide the credit, which the consumer uses for purchases.

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