If you are like many and wondering how to rebuild your credit the best ways possible, you might be interested in a plan to get you there. Many people are intimidated by credit because for so long it was a mystery what exactly was calculated to come up with your credit score.
When you begin looking to rebuild your credit you have to start with the basics, like figuring out if you can afford you current bills. The simple truth is that you cannot expect to repair your credit if you do not have the money to do so. I always recommend that you take some time and tally all of your monthly payments with all of your daily expenses. Then take your income and minus the previous calculation which shows how much money you are actually left with after you pay for all your expenses. If that number is negative you have to make some cuts. You just have to think of anything that you spend money on all the time, but really don’t need. This might just end up being a trip to the store before work or a stop at the bar after work.
Do not cut up all your old credit cards, this is not going to help. You just need to stop over using them and start using them wisely. Use the credit cards as a tool to boost your credit rather than something that will harm your credit. You want to use your credit cards, but not much more than a little bit each month. Doing this will keep your credit going, but you are going to have to be paying off more than you are spending if you want to do the right thing.
When you are rebuilding your credit you are going to need to understand credit utilization which is a major factor in the building blocks of credit management. Imagine a credit card company said you could have $1,000 in available credit and you had used $350 of that, your credit utilization would be at 35% which is right around the maximum that you would want to take it. I always recommend that you never exceed this number and if you do, you bring it back down as fast as you can. When you reduce your utilization your credit goes up fairly quickly.
One of the many factors in rebuilding your credit is trying to eliminate any past due accounts. Anything that is in collections needs to be paid off. This is the best way to have them report that it is paid in full so that your credit can begin to heal itself. This can be a long and difficult journey, but it will be worth it if you can get your credit back up to where it needs to be.
Once you have developed a budget that works well with paying off all of your bills make sure that you are using any extra money on your highest interest bearing accounts. Pay all extra amounts to the highest interest account because those are the ones that you are losing the most money on. This may not seem like it factors into your credit score, but in the long run it will matter. This is going to put you on the fast track to financial success which always goes hand in hand with a rising credit score.
Total accounts is another factor of credit scores. The more lenders willing to give you credit, the better you appear. This shows that you are someone who has a lot of options and you have not burned many bridges along the way.