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 the best of us, 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. Credit bureaus track how often you pay your credit card balances and other loans. 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 unsecured credit cards, 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 three major credit bureaus once every twelve 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 credit score, so it’s important that you monitor it and keep it low. It’s generally recommended keeping this ratio below 30%.
5. Consolidate Debt with a balance transfer or loan
Debt consolidation can be another way to start rebuilding your credit. To consolidate debt, you may be able to use a balance transfer credit card or a debt consolidation loan.
While consolidating debt alone doesn’t rebuild your credit, it may make your debts easier to repay and allow you more flexibility in paying them off.
6. Become an Authorized User
Another way to rebuild credit is to become an authorized user. If the primary accountholder demonstrates a history of timely payments and a high credit limit that isn’t used much, you may be able to benefit – this can improve your credit utilization and build a positive payment history. 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
Many credit cards allow you to ask 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. In turn, this may improve your credit score.
8. Catch Up on Overdue Bills
Late payments generally stay on your credit report for up to seven 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 or no 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?
The time it takes to rebuild your credit will depend on your current financial situation and your credit history. Missing several recent payments, for example, is different than having missed a single payment three years ago.
How can I rebuild my credit fast?
There is no surefire way to rebuild your credit quickly. Once you take the proper steps to address any issues in your payment history, credit utilization, or credit mix, you 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 seven years. If you haven’t already, focus should focus 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.