It might be tempting to think we can’t “rewrite” our credit history, but there is a path forward. Credit history affects many parts of a person’s life – in all ages and stages. Whether you’re looking to rebuild credit after some bumpy experiences, or establishing credit for the first time, credit matters. Understanding options to improve credit history is helpful especially during today’s uncertain economic times.
Improving credit history helps improve credit scores, which then has the potential to give people access to favorable loans, credit cards and more. A lot of people grapple with a challenging credit history. Recent research from the Financial Health Network shows that more than two-thirds of Americans—nearly 170 million people—are financially vulnerable, and many of the reported challenges are with credit history.
Your credit history is based on patterns over time, with an emphasis on more recent information. Rebuilding credit history will take some patience, but it can be done! Read on for some tips from out partners at GreenPath Financial Wellness!
Tips to improve your credit history include:
Talking to a credit counselor like the ones at GreenPath can help you understand your financial situation, explore different options, and make a personalized plan. 93% of people who talk to the counselors at GreenPath leave the conversation with a plan for achieving their goal.
As noted above, one potential option is to look into a credit builder loan – depending on your specific financial situation. A shared secured loan, also referred to as a credit builder loan, is an option for those with poor credit, little to no credit history, or looking to (re)build their credit.
It’s like a personal loan in that the borrower typically receives a one-time lump sum. The amount borrowed is deposited (frozen) in a savings account until you have repaid the loan. Because these loans are secured by collateral, the interest rates are typically lower than interest rates on unsecured personal loans. A secured loan could make sense as a path for a borrower to help them prepare for other types of credit (car loan, mortgage) that are more difficult to qualify for.
As with any type of credit that a consumer is considering though, it is important to understand the terms, see if there are up-front costs, annual fees and what the monthly interest rate is. This option will make sense once you have a full view of your finances. It’s a good approach to find a loan you can comfortably afford – the monthly payment will fit into your budget and can be paid on time each month. On-time payments are reported to credit bureaus.
For anyone with limited credit history, a secured credit card is designed to help establish, strengthen or rebuild credit.
A secured credit card offers benefits and protections of a standard credit card—but you must put down a security deposit first. The spending limit is based on the deposit amount. If you manage your line of credit responsibly, you’ll get your security deposit refunded in full. In most cases, secured cards come with high interest rates so it will be costly if you carry a balance.
Using a secured card can boost your credit score relatively quickly – especially if you make on-time payments every month. These cards can also help you maintain a good credit utilization ratio if you keep your debt low and pay off your balances.
When it comes to rebuild your credit history, you don’t have to go it alone. Trusted, caring GreenPath counselors are ready to provide specific options for your situation. They can help pull your credit report and conduct a full credit review, as well as understand how best to manage any outstanding debt.