6 Helpful Strategies to Rebuilding Your Credit - CCCU
Tuesday, December 10 CCCU
6 Strategies Oregonians Should Take to Rebuild Their Credit
Rebuilding your credit doesn’t have to be daunting. Learn how Consolidated Community Credit Union is helping its Portland, Oregon members manage their credit by keeping a few practical things in mind when increasing your credit score.
If your credit health isn’t quite where you’d like it to be, you might find yourself asking, “How can I rebuild my credit,” or “How can I raise my credit score?” Rebuilding your credit is definitely possible, but increasing your credit score will take some time and dedication. That’s why we’re here to provide a few practical tips to keep in mind when improving your credit.
The time and effort necessary to rebuild your credit are dependent on your unique situation. Several years of late payments and maxed-out credit cards
will take additional effort to mend. On the other hand, if you over-borrowed once or twice to get through a challenging period, it may be easier to restore it if there are fewer blemishes. No matter your starting point, the following six strategies will help you reestablish your credit.
1. Make on-time payments
On-time payments hold a lot of weight for your overall credit score
. One or two late payments won’t have much impact. And yet, if you’ve been chronically late or ignored debt collectors for more than a couple of months, those actions can hurt your credit considerably. Paying off a credit card won’t remove inconsistent payment history from your credit report. Lenders want to know whether borrowers are responsible enough to make long-term regular payments.
First, make sure you’re up-to-date on every account. Next, establish a plan to make on-time payments on your personal loans
or credit cards each month. If you have trouble remembering when to pay, you can rebuild your credit by setting up automatic monthly payments. Alternatively, you could set recurring reminders on your smartphone to pay each account on time. Even if you can only afford the minimum amount due for the time being, paying by the due date is crucial.
2. Pay down your debt
In addition to making payments on time each month, you’ll want to focus on paying down your debt. If you feel like you’re drowning in debt and compounded interest rates, the concept of paying anything over the minimum amount due might seem impossible. Rebuild your credit by paying as much as you can – even if it’s only the minimum payment at first. You might add an additional $5 to your payment the first month, an additional $10 the next month as a tactic to paying off your debt. You can also increase your payments as you begin to gain solid financial footing. Our Portland credit union also offers ways to help you manage your credit score by paying off your credit card monthly
3. Master your credit utilization ratio
Your credit utilization ratio (or debt-to-credit ratio) is the amount you owe divided by the total credit limit. For example, if you owe $2,500 on a credit card with a $5,000 limit, your credit utilization ratio is 50%. To have a good credit score, you typically need to carry loan balances of 35% or less of your total line of credit, but 25% or less is even better. Owing much more than 35% of your total available credit can negatively impact your credit health, so we always recommend staying aware of your credit utilization ratio when rebuilding your credit.
4. Use credit cards responsibly
Once you get your loan balances to 35% or less, try to keep your balance low
to rebuild your credit. For some people, this means not using their credit cards at all and keeping them at home to avoid the temptation of spending. For others, it means paying off the amount they owe each month to achieve a reasonable balance. If you’re recovering from habitual overspending and poor credit habits, practicing responsible credit card usage can be exceptionally hard. That being said, everyone can get the hang of using a line of credit responsibly. The most important thing is to hold yourself accountable for what you spend each month by making sure you pay it back before the interest kicks in.
5. Monitor your credit history
Monitoring your credit history is a critical part of rebuilding and maintaining your credit. Hard inquiries occur when a lender checks your credit to decide whether to approve you for a loan. One or two hard inquiries a year are standard and usually won’t hurt your credit score. However, if you have too many hard inquiries in your credit report over a short period, it can have an impact when you’re trying to rebuild your credit score. Additionally, soft inquiries from your employer or a Portland credit union will not impact your credit score.
You should also check your credit report often to make sure everything is correct. Credit reporting mistakes aren’t unheard of, and credit fraud is relatively common. We want to keep you and our Portland, Oregon credit union members safe, so if you notice any errors on your credit history, you can dispute them and have them taken off your report. Also, if your creditor forgives a late payment, you may be able to get the ding removed from your credit report as well.
Many people sign up to be notified of any changes to their credit reports. That way, you can review new accounts and changes, make sure the information is accurate, and promptly address any mistakes on your account. Feel free to stop by one of our credit union branches in Portland, Oregon
if you’d like more advice on to monitor your credit history.
6. Monitor your credit score
Lastly, you should get used to monitoring your credit score, particularly if you’re a Portlander actively rebuilding their credit. If you have a score of 620 or below, your credit is substandard. Anything between 621 and 680 is typically considered average. A score of 681 and above is good, and 700 and higher is excellent. Slight spikes and dips are normal, but in general, you’ll want to see an overall rise in your credit score as you work on rebuilding your credit.
Rebuilding Your Credit with the Help of a Portland Credit Union
A good credit score and credit history will give you financial freedom. If the process of rebuilding your credit seems daunting, try to take it one month at a time. Slowly but surely, you’ll be on your way to better credit. Get in touch with us at CCCU, or visit one of our Portland branches, to find out how joining a credit union can help you maintain long-term monetary health