Going through a financial hardship can have a major impact on your credit record. According to the Consumer Financial Protection Bureau (CFPB), late payments and foreclosures generally stay on your credit report for 7 years. Rebuilding your credit record — and credit score — takes time, but there are some steps you can take to help.
- Pay your bills on time. Make sure that your payment gets to the company you owe by the due date. If you are paying online, set reminders the day before a bill is due or enroll in autopay so you are never late. If you pay by mail, set a reminder to send the payment a few days before it is due to ensure an on-time delivery.
- Don't get too close to your credit limit. If you get too close to "maxing out" your credit card, it can hurt your credit score. Experts advise using no more than 10% to 30% of your total credit limit. So if your credit card max is $10,000, stay between $1,000 and $3,000.
- Pay off your credit card balance every month. If you use a credit card, it is essential to pay off your balance in full every month. This can help you avoid paying finance charges and build better credit because it keeps you from getting too close to your credit limit.
- Check your credit report and fix errors as fast as possible. When you review your credit report — which you are able to get for free every 12 months from Equifax, TransUnion and Experian — you may find errors that are bringing down your credit score. If find any, correct it by filing a dispute with the credit reporting company and the company that was the source.
Learn more tips on how to rebuild your credit from the CFPB. For personalized advice on the most effective ways to raise your credit score, call a credit counselor that is approved by the Department of Justice.
