Tips for rebuilding your credit

NASHVILLE, Tennessee (CONSUMER REPORTS / WTVF) – Lots of people struggled in the past year and may not always have been able to pay their bills or at least pay them on time – which can really affect your financial situation for years to come.

If you don’t pay your bills, it can hurt your credit score. Your credit score can affect everything from the interest rate you pay on your mortgage or credit card to your insurance premiums. Yet millions of people have very low credit scores or no credit history. However, there are ways to rebuild your credit.

It’s a problem that millions of people face: Credit scores are so low that it’s hard to qualify for a mortgage, among other things.

“A bad credit can also make it difficult to rent an apartment, go to college or even get a job,” said Lisa Gill of Consumer Reports.

Here’s the kicker – if you want to build your credit, you have to get credit. But how do you get credit if you have bad credit?

An important first step: open a bank account, take out several small loans and make one-off monthly payments, which over time should improve your score.

Next, consider applying for what is called a secured credit card, which means you have secured the card with cash. You can also ask a family member with good credit to add you to their credit card. Just make sure you have a good relationship with the person because if you miss or are late with a payment it can hurt both your scores.

Also, if you have a debt that is in the process of being collected, pay it off as soon as possible and make sure you pay all of your bills on time to avoid collections in the first place.

“Once you’ve paid off any debt in collection, many credit scoring systems won’t weigh them down heavily when calculating your score,” said Gill.

Finally, be sure to check your credit report carefully. Dispute any mistakes you might find by sending a certified letter with proof to the big three credit bureaus. They have about 30 days to respond.

There are companies that promise to help you repair your credit. But financial experts say beware of quick credit services that offer help for a fee. You don’t have to pay to repair your credit. It just takes a solid financial plan and some time.

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