From being able to take out a mortgage to getting a new credit card with great perks, your credit history can have a huge impact on your finances. But it can be challenging to understand what can help build credit – and what can hurt it. Building credit may be harder if you’ve experienced a setback like a job loss or a medical emergency, which may cause you to fall behind on your bills and, as a result, damage your credit health. It can happen to anyone, but the good news is that you can rebuild your credit and recover.
These credit-strengthening tips may help, whether you're striving to get back on course or just want ways to keep a good track record going.
1. Pay your bills on time
Payment history is a big part of your credit score. If you’re trying to rebuild your credit, focus on making payments consistently and on time.
2. Consider a secured credit card
If you’re having difficulty getting approved for an unsecured credit card, you may want to consider a secured credit card. These cards require a security deposit, which acts as collateral on purchases, and can be easier to qualify for than unsecured cards. Demonstrating responsible credit use with a secured credit card can help you start rebuilding your credit.
3. Review your credit report
It’s a good idea to obtain a copy of your credit report and review it for fraud or potential errors. You can request a credit report from each of the 3 major credit bureaus once every 12 months.
4. Keep an eye on credit utilization
Your credit utilization ratio shows how much of your available revolving credit you’re using. This number can play a significant role in your creditworthiness, so it’s important that you monitor it and keep it low. It’s generally recommended to keep this ratio below 30%.
5. Consolidate debt with a balance transfer or loan
Debt consolidation can be another way to start rebuilding your credit. You may be able to use a balance transfer credit card or a personal loan to consolidate debt. When considering these options, search for lower interest rates than what you are currently being charged on your existing debts.
While consolidating debt alone doesn’t rebuild your credit, it may make your debts easier to repay by simplifying your payments and potentially being charged less in interest. If you consolidate credit card debt using a new balance transfer credit card or a personal loan, the additional credit may decrease your credit utilization ratio and improve your creditworthiness.
6. Become an authorized user
Another way to rebuild credit is to become an authorized user. If the primary accountholder demonstrates responsible credit use, you may be able to benefit – this may improve your own creditworthiness. Keep in mind that the card issuer must report authorized users to the major credit bureaus for it to impact your credit.
7. Ask for higher credit limits
You may be able to ask your card issuer for a credit limit increase. When you increase your credit limit but keep the same spending habits, you use less available credit and decrease your credit utilization. This may improve your credit score.
8. Catch up on overdue bills
Late payments generally stay on your credit report for up to 7 years and can impact your credit score significantly. If you have any overdue payments on credit cards or other loans, you’ll want to develop a strategy toward paying these as soon as possible and making future payments on time.
9. Consider your credit mix
Credit scores typically factor in the diversity of your credit accounts (such as mortgages, personal loans and credit cards), known as your “credit mix.” When lenders consider approving you for credit, they like to know that you’ve handled a variety of debt types responsibly over time.
Citi credit cards that may help rebuild credit
Credit cards that offer low intro APR on purchases, balance transfers, or both – such as the Citi® Diamond Preferred® Card, Citi Simplicity® Card, and Citi Custom CashSM Card – may be good options to help rebuild your credit.
Although you must still make minimum payments on time to keep the introductory APR and, for balance transfers, transaction fees can still apply, taking advantage of low interest rates for an introductory period can give you more flexibility to start rebuilding your credit.
Rebuilding credit - frequently asked questions
How long does it take to rebuild credit?
This depends on your current financial situation and credit history. Missing several recent payments, for example, is different than having missed a single payment 3 years ago.
How can I rebuild my credit fast?
There is no surefire way to rebuild your credit quickly. Once you take steps to address any issues in your payment history, credit utilization or credit mix, you may should start to see your credit improve over time.
If I’ve made late payments, how long does it take to rebuild my credit?
Although there’s no one answer to this question, late payments generally stay on your credit report for up to 7 years. If you haven’t already, start focusing on paying these debts and consistently making new payments on time.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
