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How to Rebuild Credit

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How to Rebuild Credit

Whatever the credit setback, you can get your credit back on track.

As you improve your credit, you’ll want to track your progress. A good tool for this is the free Credit Report Card, which gives you free credit scores and lets you gauge your progress as you rebuild credit. Your credit profile is updated every month so you can watch your score lift as your new positive credit history begins to build.

These credit-rebuilding strategies will help you rebuild credit the smart way.

How to Rebuild Credit After a Bankruptcy

Your payment history accounts for 35% of your credit score. And making small, steady on-time payments is the most effective way to rebuild your credit after bankruptcy.

Use a secured card with a low credit limit to get started. After several months of payments with a secured card, you may qualify for a retail card or department store card, which tend to have more lenient credit requirements than traditional credit cards. Keep card balances low, using 10% to 15% or less of your card’s credit limit whenever possible.

Making on-time payments on a small installment loan is another good way to build up your payment history and improve your credit score.

Separate your credit from your ex-spouse. You’re not married anymore and you don’t want a former spouse’s credit choices to affect your credit scores any longer, especially if he or she has a tendency to run up credit card charges or fall behind on payments.

You can start by closing any joint credit card accounts or asking your credit card companies to re-issue cards in your name only.

You’ll want to refinance any joint installment loans, such as auto loans, as well. One of you may opt to buy out the other’s share or you may decide to sell the car and split the cash. The focus is to get your credit separated from a former spouse.

How to Rebuild Credit After a Foreclosure or Short Sale

A foreclosure or short sale of your home may cause your credit score to drop by as much as 160 points.

To rebuild your credit, pay credit card and loan accounts on time and pay down credit card balances. Getting balances down to less than 10% of your credit limit is best for your credit scores and, of course, paying off credit card debt in its entirety is great for your wallet.

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  • Meet Our Expert

    lucy_lazarony GravatarLucy Lazarony is a freelance personal finance writer. Her articles have been featured on Bankrate, MoneyRates, MSN Money, and The National Endowment for Financial Education. Prior to freelancing, she worked as a staff writer for Bankrate for seven years. She earned a bachelor's degree in journalism from the University of Florida and spent a summer as an international intern at Richmond, The American International University in London. She lives in South Florida.
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