Effective Ways to Rebuild and Improve Your Credit Score – Our Guide

August 21, 2019

In today’s financially driven world, just about everyone is aware of how important their credit score is. Your credit score is your financial reputation on paper. It reflects all your financial transactions— from the time you’ve acquired credit for the first time up to the most recent financial undertakings you’ve had. 

Having a good credit score is paramount. This is because it represents your creditworthiness. If you have a good credit score, you have a better chance of getting approved for credit cards, loans, and other financial pursuits. That is why most lenders or creditors refer to your credit report obtained from the credit bureaus. This report serves to determine your qualification and eligibility.

Some South Africans find personal finance a struggle. In fact, a third of South African adults live paycheck to paycheck, neglecting to prepare for the worst-case scenario. 

If you’ve finally realised the importance of a good credit score, chances are that you are trying to get back on track financially. If you’ve resolved to rebuild your bad credit and improve your credit score, there are a few certain things that you can do to help yourself out. Keep reading to learn more about how to improve your credit standing.

New Credit Acquisition

If you currently have a poor credit score, chances are that you’ve used a credit card or two and failed to pay them off on time. You may question the idea of getting yet another one. The question, however, is how can you possibly rebuild your credit if you aren’t going to open at least one new credit card account? 

Your application for a credit card will be based on your score. This means that lenders will provide certain financial terms and conditions that they expect you to comply with. Be prepared for application denials from lenders who decide that you aren’t worth the risk. 

Although it can be discouraging, don’t give up too soon. Once you’ve managed to get a card, make sure that you manage your credit effectively and pay off every bill on time. Rebuilding your credit all starts with getting a new credit account.

Good Credit Habits

At this point, you’ve got to form good credit habits. Your financial mistakes in the past cannot be undone, but they can serve as a lesson. If you have a bad credit score, you already know that financial management is not one of your strengths. 

However, this doesn’t have to be true for the rest of your life. It’s about time to break old habits and build new ones— financially speaking. What does this mean? This means making sure that you stay below your credit limit and pay your credit card bills on time, preferably in full. You should also no longer make transactions you can’t afford, pay just the minimum, and even skip credit card payments. When you improve your spending habits, your credit score will improve.

Timely Payment

Paying on time is a crucial part of good financial management. It will make or break your credit score. If you truly want to rebuild your credit score, then you have to make sure that you’re giving it your all to ensure you aren’t falling beyond on your payments. 

At times, you may have to delay your payment until the grace period. Paying after that period, however, will result in you being flagged as being delinquent. You will then get reported to the credit bureaus, resulting in quite an eyesore on your credit report. 

When looking to improve your score, avoid delinquencies on any accounts, even small ones such as library fines, school lunch, and medical bills. The best way is to stay on top of your finances— always. After all, your payment history is the most crucial factor for rebuilding your credit.

Replacing Bad Credit

Finally, the last step is to replace your bad credit with good credit. Your bad credit won’t improve until you show your creditors that you can build a good credit score in the long run. How do you go about doing this? First off, charge only what you can afford. 

There’s no room for overspending. Second, pay your bill on time on a regular basis. Payment delinquency is a big no-no. Third, don’t take on too many credit cards during this rebuilding period. One or two credits will do. In the end, it takes practising your good credit habits to make a difference in your credit score.

// Final Words

These four steps will help you get back on track financially. You just need to know how to start and how to navigate through your finances along the way. We hope this post has given you some effective ways on how to rebuild your bad credit and improve your credit score. 

These skills go beyond a score. Not only will you be opening yourself up to more opportunities in terms of loans, but you will be making better personal finance decisions.