Quickest Way to Rebuild Credit

Credit may need to be rebuilt for a variety of reasons: from a string of delinquent payments resulting in account closures or collection agency involvement, to court judgments, repossessions or even bankruptcy. FICO, the major credit score company, advises that the quickest way to rebuild credit is to demonstrate you can use it responsibly. It is difficult to open new accounts after a personal financial meltdown, but it is possible to get credit cards once again and use them to rebuild strong credit reports.

Instructions

1

Save up at least $200 to $300. Banks do not want to open accounts for people with bad credit unless they have a repayment guarantee. Your savings can be used as security for your new credit card so you can start to rebuild a good record.

2

Review secured credit card offers. Your current bank or credit union may offer secured cards; otherwise, many other banks provide these accounts. The Credit Infocenter credit repair site suggests finding a bank that offers secured credit cards with no application fee and reasonable interest charges. The account should convert to a traditional credit card after you make on-time payments for 12 to 18 months, and the activity should be reported to the TransUnion, Equifax and Experian credit bureaus.

3

Open the secured credit card account with the most favorable terms and use it regularly. Demonstrating financial responsibility is a huge factor in rebuilding your credit, and FICO explains that card use and on-time payments have a major influence on your score. Make modest charges that you can easily pay off within a few months.

4

Order and review your credit reports to make sure your secured credit card information is being reported accurately. The Federal Trade Commission explains that the Fair Credit Reporting Act entitles you to free yearly credit reports through annualcreditreport.com. Your reports should show the account, including your credit limit, balance and payments.

5

Open new accounts occasionally as your credit reports improve. FICO advises that you need a mix of loans and revolving credit to maximize your score. You can find yourself in financial trouble yet again if you get too much credit, so limit yourself to loans and cards you need, like a second credit card for emergencies and an auto loan.