The basics of building your credit back up

If your credit has taken a hit lately, it can feel like the end of the world. Doors, such as the door to a good mortgage, can start closing, and it can become harder to plan for those important future purchases. However, not all is lost. It might take some time, but you can start building your credit back up immediately. Here are a few ways to begin your journey back to a healthy credit score.

Pore over your credit report

Your credit score is determined largely by your credit report, which is a detailed report of your past credit agreements, including any debt that you have accrued or any loans that you defaulted on. However, a lot of people will find false reports on their credit report, often these are reports that someone else is responsible for or even, in some cases, fraud under your name. Sites like Experian can help you check your credit report. If there are any records there that you don’t recognize, get in touch with the creditor in question to set the record straight.

Get the loans suiting your scores

One of the best ways to build your credit is to follow new credit agreements as closely as you can. However, if you have a low credit score, you might find your options diminishing. Fewer firms are going to lend to you in the first place. Companies like ChooseMyCar can help you find the finance deals that are suited for your credit score. They might not be as flexible as the deals offered to those who have good credit, but you need to start rebuilding from somewhere.

Reduce your credit utilization ratio

Aside from how much credit you have taken out, how much of it you actually use also matters. This counts for forms of rolling credit, such as credit cards and overdrafts. Opening affordable credit cards as shown at sites like CardRates isn’t always a bad idea. Making occasional use of your credit while keeping your utilization ratio low can actually help build credit consistently. This means that you don’t dip too much into your credit card or overdraft at once, but only use it a little at a time, and don’t wait too long to restore the balance.

Avoid applying for everything right away

You might want to start applying for loans and credit cards to start building your credit back up immediately. However, credit reporting agencies look at a flurry of sudden applications as suspicious activity or, at the very least, like you’re not being too responsible. If you’re applying for a loan and a credit card, do it one at a time and give it some time after you have your response, whether your application is successful or not.

Credit scores will fluctuate throughout the average life, that much is to be expected. What matters now is that you know how your credit works, and you know how to keep building on it over time so that those future purchases can become much more manageable.