5 Steps to Rebuilding Your Credit

iQuanti: Credit is an essential part of our financial livelihood. Everyone deserves access to credit options, as it impacts our ability to get approved for things like a mortgage or personal loan. So, how can you begin rebuilding your credit if you have a low credit score?

It takes time and effort but improving your credit rating and getting back on track with your finances is possible. Here are some steps you can take to repair your credit.

Get a secured credit card

Getting a secured credit card is one of the best ways to rebuild your credit. This type of credit card requires you to put down a deposit, which becomes your credit limit. Since you're borrowing against your own money, lenders see this as less of a risk and are more likely to approve you for one of these cards. Remember to set yourself up for success by only depositing what you can afford to use and making your payments on time.

Become an authorized user on someone else's credit card

If you have a family member or friend with good credit, you may be able to become an authorized user on their credit card. You'll be able to use their credit card, and their payment history will appear on your credit report, which can boost your credit score. However, if you lapse these payments, your family member or friend will have to pay back these debts for you.

Get a personal loan from a lender that reports to the credit bureaus

Personal loans can help you rebuild your credit. By making timely payments on a personal loan, you show lenders that you're a responsible borrower and improve your chances of getting approved for future loans. A lender reporting your account activity to nationwide credit bureaus can help you establish and rebuild your credit history.

Pay off your debts

One of the best ways to improve your credit score is to pay off your debts. If you have outstanding debts on your credit cards or other loans, start working on paying them off as soon as possible. The sooner you can get them paid off, the better it will be for your credit score.

Keep your credit utilization low

Your credit utilization ratio is the amount of credit you use compared to your credit limit. Keeping your credit utilization ratio low is vital to your credit score's well-being. Doing so means not maxing out credit limits, paying off debts on time, and managing different types of credit simultaneously. By doing so, lenders will consider you a responsible lender, which should reflect positively on your credit score in the future.