How to Rebuild credit?

At the onset, firstly, give yourselves a pat on the back to realize the importance of a good credit score and for striving to rebuild it. A good credit score not only ensures you better credit facilities but also lower interest resulting in lower EMIs and free savings. After all, money saved is money earned, right?

Rebuilding your credit can be a bit tougher than starting from scratch as you are now trying to show the lenders and the credit card issuers that despite some late payments and slip ups in the past you are now assured to repay the loan you take within the specified deadline. It is essential to build good credit as in today's modern world credit checks are made before sanctioning of home or auto loans, corporate hiring and provision of basic living utilities as well. Even if you get a loan sanctioned at a low credit score, the interest you’ll have to pay will be very high. You can start rebuilding your credit by making sure there are no big blunders on your credit report as correcting this error can add points quickly to your otherwise low credit score. If you’ve been a victim of identity theft, checking and correcting your credit reports can tip you off. Here are five basic and easy steps to help you rebuild your credit -

1. Make payments on time

You got to pay all your bills and the existing lines of credit on time because your payment history is the single biggest factor that affects your credit. So, it’s understood that when you're rebuilding credit you can at no cost afford to miss a payment. Delayed payments stay on your credit reports for up to 7 years. These take longer to recover from than other missteps

2. Use your credit limit wisely

Credit utilization is another important factor in maintaining or rebuilding credit. That means the amount of money that you use from your designated credit limit plays a vital role in your credit score. Most experts suggest that you use no more than 30% of your designated credit limit. Also, your score will not be affected by past high credit utilization once you’ve brought balances down.

3. Apply for a secured credit card

It is possible that your current credit cards have been sealed and no credit card issuer is providing you with new a new credit card because of poor credit score. What you can do at such a time is that apply for a secured credit card. These cards require an up-front deposit and the amount that you deposit then becomes your credit limit as well. After that it works like any normal credit card. Make sure that you get a secured credit card from an issuer who reports payments to any of the three major credit bureaus.

4. Get a co-signer

If you’re having inconvenience getting access to credit, then you could ask a family member or a close friend to co-sign a credit card or loan for you. What this means is that this person is taking full responsibility to pay your loan in case you fail to pay it on time. You must realize that this option is very risky as the co-signer is also putting his credit reputation on risk here. As if this co-signed loan or co-signed credit card goes rogue then the friend or relative could be denied for his application to apply for more credit later because this account will be considered for assessing his financial stability.

5. Become an Authorized user

You can ask someone near and dear to you, to add you as an authorized user on a credit card. Your credit benefits just from being an authorized user of the account. You don’t have to make any payments or access the account. A few cards allow primary cardholders to set certain spending limits for authorized users, which could make the account holder feel more comfortable and secure about adding you. Two things to keep in mind regarding this are: The impact on your score may be moderate, because you aren’t legally responsible for debts on the account. And being an authorized user can also hurt your score if the account holder doesn’t pay the bills on time, so be careful and only chose primary cardholders with good credit habits for this.