How to Rebuild Credit

Key insights:

• Consistently paying bills on time is an important factor in your credit score
• Using a secured credit card and keeping credit utilization below 30% can help rebuild credit effectively
• Reviewing your credit report for errors and consolidating debt are practical steps to help improve your credit health
• Becoming an authorized user or requesting higher credit limits can also help to positively impact your credit score

From taking out a mortgage to getting a new credit card with great perks, your credit history can have a huge impact on your finances. But if you’re a new credit card user or have acquired your first loan, it can be challenging to understand what helps build credit — and what hurts it.

Building credit may be harder if you’ve experienced a setback, such as a job loss or a medical emergency. Challenges like these can cause you to fall behind on your bills and, as a result, negatively impact your credit health. It can happen to anyone, but the good news is you can rebuild your credit and recover.

9 Ways to rebuild your credit

Whether you’re trying to get your credit back on course or simply learn ways to keep a good track record going, the following credit-strengthening tips can help in your journey.

Pay your bills on time

Payment history is a significant factor in your credit score. If you’re trying to rebuild your credit, focus on making payments consistently and on time.

Setting up automatic payments for your bills can also help you stay on top of due dates and avoid late payment penalties. Some lenders may even offer discounts for autopay. For example, Citi^® Personal Loans includes a 0.5% discount on APR when you enroll in automatic payments.

Consider a secured credit card

If you’re having difficulty getting approved for an unsecured credit card, consider applying for a secured credit card. Secured credit cards require a security deposit, which acts as collateral for your credit limit, and can be easier to qualify for than unsecured credit cards.

With a Citi^® Secured Mastercard^®, you can provide up to $2,500 as your security deposit, which will then match the credit limit on your secured card, and choose from available payment due dates that fit your schedule.

Demonstrating responsible credit use with a secured credit card can help you start rebuilding your credit. If you make on-time payments for a certain amount of time, you may be eligible to get your deposit back.

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. While you’re legally entitled to a free credit report from each of the 3 major credit bureaus once every 12 months, you can now request and access the reports weekly.

Keep an eye on credit utilization

Your credit utilization ratio shows how much of your available credit you’re using. This number can significantly affect your credit, so it’s important to monitor your utilization and keep it low. A good rule of thumb is to keep this ratio below 30%.

Consolidate debt with a balance transfer or loan

Debt consolidation can be another way to rebuild your credit. You can consolidate your debt using a balance transfer, a personal loan or a Flex Loan, which may offer lower interest rates than you’re currently paying on existing debts. There may be a promotional balance transfer offer on an existing credit card, or you may be able to get one by applying for a new balance transfer credit card.

While consolidating debt alone doesn’t rebuild your credit, simplifying your payments with a lower interest rate may make your debts easier to repay. Also, a new balance transfer credit card or a personal loan can increase your available credit and decrease your credit utilization ratio, helping improve your credit score.

Become an authorized user on a credit card

Another way to help rebuild credit is to become an authorized user on a trusted relative or friend’s credit card. If the primary account holder demonstrates responsible credit use, it may help improve your credit score. Keep in mind that the card issuer must report authorized users to the major credit bureaus for it to impact your credit score.

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 while maintaining the same spending habits, you’ll likely use less available credit and decrease your credit utilization. The lower credit usage may help improve your credit score.

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 them as soon as possible and making future payments on time.

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.

While it’s usually not a good idea to take out a new loan or apply for a new credit card just to improve your credit mix, understanding what accounts you have open can help you make informed decisions about managing your credit. If you’re interested in adding a new credit card to your mix, consider pre-qualification, which allows you to see if you meet certain criteria required without undergoing a hard credit check.

Explore Citi credit cards that may help you rebuild credit

Rebuilding your credit is a journey that requires patience, consistency and the right tools. By following these steps, especially paying bills on time and managing your credit utilization, you can take meaningful strides toward improving your financial health.

Credit cards that offer low intro APR on purchases, balance transfers or both — such as the Citi^® Diamond Preferred^® Card and Citi Simplicity^® Card — may be practical tools to support your goals.

While it’s important to make minimum payments on time and consider any applicable fees, these credit cards can provide the flexibility you need to rebuild your credit with confidence. Take the next step today and explore which Citi card is right for you.

Rebuilding credit FAQ

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 from missing a single payment 3 years ago.

Can you rebuild credit fast?

There is no certain way to rebuild your credit quickly. Once you take steps to address any issues in your credit report, reduce your credit utilization or diversify your credit mix, you may start to see your credit improve over time.

If you've made late payments, how long does it take to rebuild your credit?

Late payments generally stay on your credit report for up to 7 years. While there is no set timeline to rebuild credit, if you haven’t already, start focusing on paying off 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.