4 Steps To Start Rebuilding Credit
Let’s talk about something very important but maybe not so fun: credit. If you’ve stumbled upon this because you’re in a bit of a credit pickle, don’t fret! Rebuilding credit is totally doable, and here are few steps to guide you through it.
Face the Music
First things first, take a deep breath and face your credit situation. Whether it’s a missed payment, maxed-out card, or something else, acknowledging where you stand is the first step to improvement. Mistakes happen; it’s part of growing up. Take this opportunity to learn from what went wrong. Maybe you underestimated how quickly those small purchases added up, or maybe you missed a payment (or two) because life got hectic. Whatever it is, you have to learn and grow from it, and that starts with being completely honest with yourself.
Make a Plan
Now that you know where you stand and what went wrong, it’s time to make a plan. Start by listing all your debts, from credit card balances to student loans. Then prioritize them based on interest rates or amounts owed. Some people like to focus on paying down the debts with the highest interest rates first to minimize how much they’re paying on top of their principal, but others prefer paying off the smallest loans first to cross them off the list and encourage more positive behaviors. Pick a style that’s right for you and go for it!
Budget Like a Boss
Take control of your finances by creating a budget that covers your expenses while leaving room to tackle your debts. Cut back on unnecessary spending and save wherever you can. One of the biggest factors in rebuilding credit is your payment history. Set up reminders, automate payments, do whatever it takes to ensure you never miss a due date again.
Target Your Debt
If you have credit card debt, focus on paying it down. Aim to keep your credit utilization—the ratio of amount of credit you’re using compared to your total limit—below 30%. If your credit is in rough shape, you might have trouble getting approved for a traditional credit card. In that case, consider a secured credit card. You’ll need to put down a deposit, but it can be a great way to rebuild your credit.
Rebuilding credit takes time, so don’t expect overnight results. Stay focused on your goals, stick to your plan, and celebrate the small victories along the way. And remember, you’re not alone in this journey. There are plenty of resources and people who can help you along the way, starting with Jeanne D’Arc! So, chin up, take control of your finances, and get ready to crush your credit goals. You’ve got this!
Stay Savvy!
Celia Otero is a Jeanne D’Arc Financial Wellness Specialist. She’s dedicated to promoting financial education and literacy and strives to ensure that individuals have the tools they need to navigate the complexities of personal finance. With a background in early education and adult learning, Celia believes that by empowering individuals through education they will learn to develop strong habits, make informed choices, and achieve financial well-being. You can find out more about Celia and the rest of the Financial Wellness team here.
