A good credit history is the best solution for all your financial problems. It not just decides if you’re approved mortgage or loans, but also the interest rates that you have to pay. Previous financial missteps can be obstructionist, however, there are ways to rebuild and improve the credit.
The factors affecting credit scores predominantly are payment history, credit utilization ratio, total debt, type and age of credit accounts, hard inquiries, and public records. Re-establishing a good credit history can take expectedly a lot of time. There is, however, a timeline to how long credit information appears on reports. The details about late payments are removed after seven years from the original delinquency date. Bankruptcy information can take seven to ten years; however, hard inquiries drop out just after two years.
Steps have to be taken to rebuild credit history:
Debt restructuring: The options that can be employed to get rid of debts could be credit counseling that exists abundantly as nonprofits and listed under the Department Justice’s US Trustee Program. Debt management plan can be employed to persuade your creditors to charge lower rates of interest through some mechanism. Similarly, such high-end unsecured debts emanating from multiple card balances can be tackled by debt consolidation.
New accounts: Opening a new credit account and its operations can have a significant effect on your credit report. Hence, avoid over-usage and over-extension of the credit limit.
Credit Utilization Ratio: This simply means the comparison of the total amount of credit available to actual credit usage. It is inversely proportional to credit scores and hence is recommended to be below 30%.
Timely payments: Perhaps the easiest and most recommended method of raising your financial bar is paying bills on time. Automatic payments can be the best solution other than regular vigilance.
Other than these conventional methods of creating a credit architecture, taking help from friends and family as co-signers or being their authorized users can a positive impact on the credit calculus.