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Options For Rebuilding Poor Credit

2 May 2016

Mathéo Gerard

Your credit rating can be a delicate thing. One significant financial mistake can drop your credit score more than you'd think. If you're struggling with poor credit, you should focus your efforts on improving your score. If you're not sure how to do that, there are a few places that you can start.

Focus On Your Bills First

The first thing you should do is get into a routine of paying all of your monthly expenses on time. Some utility and rent payments will affect your credit, so you need to show a history of up-to-date accounts and no late payments. Once you've gotten into a solid cycle of doing this, you can move to building a small savings account.

Build A Modest Savings

Although some people may suggest that you strive for several thousands of dollars in savings, the reality is that even a couple hundred dollars in your savings account can help. That small cash reserve can make the difference between a late utility payment or maintaining your payment schedule if a paycheck posts late.

Consider a Secured Credit Card

Secured credit cards can be a beneficial investment when you're trying to improve your credit score. Just like a traditional credit card, these cards report to the credit bureaus about your account activity and payment cycles. The difference is that they are easier to get because you secure the card with a deposit equal to the credit line balance. For example, if you're getting a $250 secured credit card, you'll have to make a $250 deposit before you get the card. The deposit serves as security to the bank so that they can cover your balance if you don't make your payments. In most cases, there's an application fee and a monthly maintenance fee for these cards, too. Just make sure that you know what you're expected to pay if you decide to apply.

Take Out A Title Loan

If you own your car outright, you can consider taking out a title loan. Even if you don't need the money, it's still beneficial to consider a loan like this simply as a tool for building your credit history. Some title loan companies report your repayment activity to the credit bureaus, so making those payments on time will help you to rebuild your credit score. This is particularly helpful if you have the financial means to make the payments and cover the interest but don't have the credit score for traditional financing.

Opt For An Installment Loan

Installment loans are another great choice for rebuilding your credit because they allow you to pay over a longer period of time. The longer period often reduces the amount you need to pay each period, which can make those payments easier to cover. In addition, these loan accounts are also reported to the credit bureaus, so that positive credit history will reflect well on your credit score. Like title loans, these are beneficial even if you don't have a need for the money. You can put the money in savings and use it to make your payments if necessary. That way, you're ensuring the timely payments required for improving your credit.

Get Store Credit

Many local stores offer lines of credit to regular customers. If there's a furniture or apparel store that you frequent, consider asking about the store credit cards. Since they can only be used in-store, they may be easier to get with a lower credit score. This is a particularly helpful tool if you're in need of a new appliance or other significant purchase, because you can get the product that you need and help strengthen your credit at the same time.

No matter which methods you choose to build your credit score, remember that making those payments in a timely manner is essential to the process. Set up a solid budget so that you know exactly how much you can afford to put toward these payments each month, and avoid overextending yourself. These tips will help you to restore your credit score over time.

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