Rebuilding your credit – where to start

Sometimes life sneaks up on you and you wonder how you got yourself into a situation you never meant to be in. This certainly applies to your personal finances, too. If you find your credit is in bad shape, there are definite steps you can take to rebuild it.

Identify the pain points

The first step is to review your credit report from all three credit bureaus so you can understand what is negatively impacting your credit and your credit score. The reasons could include late payments on bills, too many credit inquiries or just too many high-balance lines of credit.

Correct any credit errors

If your credit report contain errors, contact the credit bureaus and ask them to investigate or correct them. You can also add notes to any item in the report, allowing you to explain in your own words how and why there is an error.

No credit or bad credit

If you don’t have an open credit or have recently filed bankruptcy, you’ll need to rebuild your credit one account at a time. Start with a secured credit card from a financial institution. These accounts are backed by a savings account or by cash deposits that equal the line of credit offered. Another good source are department store cards. The key is to establish positive marks on your credit, which means making bill payments on time.

Keep older accounts active and open

If you have older credit accounts, keep them active and open. These accounts help show lenders your credit history over a longer period of time, another factor in determining your credit worthiness.

Pay your bills on time

If possible, pay down your credit card balances each month. At the very least, be sure your monthly payments are made so that your lender will receive the payment before or on the due date. The goal is to have outstanding revolving debt at 40 percent or less of your total available credit limit.

Seek help

Credit counseling can easily be found online, but beware of hidden fees and scams. A good place to start is with the financial institutions you currently use or are familiar with. You can also ask family and friends for recommendations. Credit counselors look at the cause and the effect of financial troubles and help people make smarter financial choices.

Travis Credit Union offers free professional financial counseling through its BALANCE Financial Fitness Program.

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