how to rebuild credit

Rebuilding your credit can be done in multiple ways, including making your payments on time, fixing errors on your credit reports, using credit-building tools, and becoming an authorized user. It’s no secret that having good credit can make life a lot easier. 

Strong credit scores can mean approvals for loans like car loans, installment loans, bad credit loans, personal loan options, and lower rates for services like insurance. Continue reading to learn more about rebuilding your credit. 

Know Your Credit Scores  

Credit scores are determined by credit reporting bureaus and are based on scoring models that consider your relationship with money and your debt. The three major credit bureaus are Experian, TransUnion, and Equifax.   

About 30% of Americans have bad credit scores.1 Fortunately, credit information is now more readily available than ever which can make it easier to fix a bad credit score. All three major credit bureaus are required to provide a full credit report to you every year. 

Additionally, there are many platforms that can not only provide constant reporting on your credit scores but will also detail any action taken against you that may be affecting your standing, like hard inquiries from credit applications.  

Overall, many people who are struggling with rebuilding their credit scores may discover two important truths after reviewing their credit scores:  

  • It’s not as bad as they think.
  • With time and effort, it can improve.

Dispute Credit Report Errors

Removing errors on your credit reports will help you see a fast improvement in your credit score. 

Once you have access to your credit report, you will be able to see a comprehensive list of your creditors and the outstanding balances on your accounts.  

Every piece of information on your credit report bears weight on your overall credit score, so it is important that you dispute any errors on those credit reports.

All three credit bureaus, in addition to many free credit monitoring apps, allow you to file disputes on your credit reports, and judgment usually takes about 30 days. The process is free.  

Pay Your Bills On Time To Rebuild Your Credit

Your payment history—the record of who you owe and when you pay them—is the most important factor in determining your credit score. So, the first and most effective step you can take for a positive credit history is to pay your bills. And pay them on time. Late payments can really hurt your credit, while on-time payments can help you rebuild your credit. 

In order to rebuild your credit, It is critical that you do not miss payments on any current lines of credit, monthly utilities, rent, or any other recurring debt. Moreover, those payments need to be made on or before their due date. 

Staying on top of due dates will not only help your credit score improve but can also prevent late fees and penalties from being added, which can ultimately keep you in a vicious cycle of debt. 

To avoid late payments, many experts recommend enrolling in automatic payments that pull directly from your bank account. 39% of consumers use auto pay for their bills.2

Can You Make Micropayments? Then Do It! 

If you are behind on your bills—and your monthly budget can allow it—making micropayments will help you chip further away at debt. Micropayments are small payments that are made in between billing cycles in addition to your regularly scheduled payments. This effort, over time, can make a positive impact on your outstanding balance by making it shrink a little faster. 

Get a Secured Credit Card or Credit Builder Loan

It may seem odd to rebuild credit by getting another credit card. After all, many people cite credit card debt as a huge portion of their financial worries. But a secured credit card is a great way to start moving the needle on your overall credit score. 

  • A secured credit card has a credit limit that is funded and, therefore, determined by you. Cardholders put down a cash deposit (usually $200-$500 for most cards) that serves as the credit limit. 
  • For example, if you make a deposit of $250, then your credit card limit is $250.  

While secured cards don’t often increase credit limits and typically have higher interest rates than unsecured cards, they can help people spend responsibly and create a positive payment history and, therefore, credit history—as long as those payments are on time!

Credit Builder Loans To Rebuild Credit

Credit builder loans can be tools when trying to rebuild credit and work similarly to secured credit cards in that they require a deposit. With these loans, you’ll make deposits to your lender, who will then report those to the credit bureau. Those funds will be saved in an interest-bearing savings account, and once you make your final payment, the funds will be returned to you. 

Manage Your Credit Utilization

Credit utilization is a measurement of how much of your available credit you are using. To find out your utilization rate, all you have to do is divide the total balance of your debt by the total available credit that you have. Available credit is any credit that you can use.

For those who struggle with financial management, monitoring your utilization rate is also a great way to start learning how to meet financial goals. Because your credit score is partially determined by your utilization rate, keeping this number low and stable will have the best effect on your credit report. For many years, people have been advised to keep their utilization rates below at least 30%.  

Become an Authorized User To Rebuild Your Credit

If getting a secured credit card is not the right choice for you, another tactic is to become an authorized user on someone else’s credit card. 

Becoming an authorized user on an account—even if you are not the primary cardholder—can have a positive impact on your score and help you rebuild your credit. If the primary cardholder allows it, you can be issued a credit card for use, but you don’t necessarily need to make any purchases or payments.  

This method can be a tricky one. Although you are just a user on the card, any high balances or missed payments will now be attached to your credit report as well, as most credit card companies would report both parties to the credit bureaus. So, it is important that if you do decide to take this route, be sure to pay attention to:  

Account StandingEnsure that the credit card account is in good standing.
Cardholder ResponsibilityThe primary cardholder should be a financially responsible individual whom you trust.

Assessing Your Current Financial Situation to Create a Budget and Emergency Fund

One of the most important steps you can make in rebuilding your credit is the creation of a budget. Which can only be done after assessing your current financial situation.

  • A budget is a plan that details the amount of money you need to spend over a certain period of time. Your personal budget should list how much money should go towards your living expenses and paying down your debt. Many budgets are created to detail spending from month to month. 
  • Budgeting is one of the key components to rebuilding your credit because it will direct your spending to meet your overall financial goals. The purpose of the budget is to make sure that you are paying essential bills and debt before you consider any other type of spending so that essential funds aren’t reallocated to any unnecessary expenses. 
  • One of the most important aspects of any budget—particularly for those who are looking to build better financial habits, is the creation of an emergency fund. This is a pool of money that is set aside for those unforeseen circumstances that are a part of life. 

How Long Does It Take To Rebuild Credit?

There is no standard timeline for turning bad credit into good credit. Every bad credit situation is as unique as the person it belongs to. The time it takes to transform your credit score depends on how severe the credit issues are and how long they have existed.  

FAQS: How To Rebuild Credit

How can developing a repayment strategy for outstanding debts affect credit?

Developing a repayment strategy can positively impact your credit score by improving your payment history. Prioritizing debts, especially those accounts with high credit utilization ratios, such as any potential credit card balances, can help lower your overall debt and demonstrate responsible credit management to the credit bureaus.

What should I consider when negotiating with creditors to protect my credit history?

When negotiating with creditors, it’s important to consider how the terms might affect your credit history. Requesting options like extensions or reduced payment plans can help maintain your payment history without negatively impacting your credit score.

How does understanding my credit limit across different credit accounts help in rebuilding credit?

Understanding your credit limit on various accounts is crucial for managing your credit utilization ratio, a key factor in your credit score. Keeping balances well below the credit limit helps in rebuilding credit and demonstrates responsible credit use to lenders.

What impact does consolidating credit card accounts have on my credit utilization ratio?

Consolidating multiple credit card accounts into one with a lower interest rate can improve your credit utilization ratio by reducing your overall credit balance relative to your total credit limit. This can positively impact your credit score if managed responsibly.

How does establishing a good payment history with new credit accounts aid in rebuilding credit?

Establishing a good payment history with new credit accounts is vital in rebuilding credit. Consistent, on-time payments are reported to credit bureaus, positively affecting your credit score and demonstrating your reliability to future lenders.

Key Takeaways With CreditNinja

Rebuilding your credit is possible, and there are several strategies to do so! Making your bill payments on time, fixing credit errors, familiarizing yourself with how credit scores work, becoming an authorized user, and even budgeting can all help! Once you do rebuild your credit, CreditNinja urges you to think about an emergency fund and budget, as those tools can be essential to maintaining a good credit score once you get there! 


  1. How Many Americans Have Bad Credit? | Fox Business
  2. 39% of Consumers Pay Monthly Bills on Time With Automatic Payments |

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