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The Advantages of Rebuilding Your Credit

Paying off your debts could offer a lot of advantages.
July 17, 2021
7 mins read

Missed and late payments, as well as judgments and collections, appear on credit reports for seven years. Thus, it’s essential to maintain a good credit reputation.

But sometimes, our credit score fumbles and the only option left is to rebuild it. In addition to being disqualified for loans, there are other consequences of a bad credit history. However, we stand to gain a lot from getting back on our feet and rebuilding our credit.

Below are the gains one can enjoy by rebuilding their credit:

You Can Stop Getting Cosigners

When you have bad credit, you’ll almost always require cosigners on your loans and credit cards. Loans that anyone cosigns will appear as a debt on their credit record. That implies that if the cosigner applies for a large loan, such as a mortgage repaid over 15 to 30 years with monthly payments, they may be denied because they appear to be in too much debt.

Basically, cosigners assume a risk for which they are not initially liable. If the borrower defaults on the loan, the cosigner assumes responsibility for repaying the loan. This is why it’s challenging to get a cosigner for a loan.

Creditninja is an online lending company that can advise if you need to have a cosigner depending on your current financial state so you can seek out other options before actually getting a cosigner.

You Can Avoid Creditor Harassment

Creditor harassment is the inappropriate and repetitive contact from a creditor or debt collection agency that bothers and threatens you. Some creditors even publish names of people who fail to pay their debts according to the terms.

While there’s something you can do to stop the harassment, it’s always better to avoid them by rebuilding your credit now. The best action to take is to keep a file of all letters or papers sent to you by a debt collector and copies of everything you send to the debt collector. These documents will help you in dealing with creditor harassment in court.

You Have High Chances of Getting a Job

When you apply for a job, employers may examine your credit report to determine your liabilities and money management skills. However, they’ll need a written authorization from you to access your credit score.

If you have a lot of delinquent credit accounts, it may indicate that you’re disorganized or don’t honor your promises. Also, if you have a lot of debt or credit cards with a significant number of charges, it may indicate that you’re desperate and inclined to steal from the company.

Rebuilding your credit will ensure your employers don’t draw any unfavorable conclusions from your credit report.

You Can Secure Your Children’s Credit Score

Some banks will consider the parents’ credit score when assessing a student’s eligibility for student loans. Because children don’t have credit scores, parents who’ll be co-borrowers must have excellent credit scores to qualify for an education loan. If the parents’ credit score is low, the loan will be denied.

Also, financial management is one of the things that children learn from their parents. They can also adopt bad habits when it comes to finances from their parents.

Best Practices in Rebuilding Credit

Bad credit can improve once a borrower makes efforts to achieve a decent credit score. There’s no shortcut to re-establishing good credit. However, there are effective practices that can help you regain a good credit reputation.

Be Punctual in Paying Your Bills

Making it a habit to pay your bills on time can relieve stress, save money and improve your credit score. Another advantage of paying credits on time is the possibility of getting a lower interest on your next loan application.

Automated bill payment is a good option for those who manage multiple bills. Once you sign up for automated bill pay, the amount you owe will be deducted each month automatically from your checking or savings account. In addition, some companies may allow their clients to choose the payment date, amount and payment plan (weekly, semi-monthly, or monthly) for added convenience.

You can also reschedule the due dates if your flow of income doesn’t satisfy the assigned due dates. Take note that the type of debt and the lender’s decision will decide if the request is granted.

Apply for a Credit Builder Loan

A credit-builder loan allows you to demonstrate that you can consistently make on-time payments while developing or rebuilding your credit. Because your payment history is a significant part of your credit ratings, this can help you improve your credit.

With this loan, you not only improve your credit score, but the creditor doesn’t have to take on much risk. If you default on the loan, the creditor can simply reclaim the funds in your account. However, if you don’t pay by the due date each month, the lender will report the late or missed payment to the credit bureaus and your credit won’t improve.

Keep Track of Your Credit Reports

Checking your credit reports can help you become more aware of what creditors may see. At the same time, checking your credit reports can also help you discover any information on your credit report that’s incomplete or inaccurate.

You may come across any inaccurate information that’s hurting your score. If this happens, file a complaint with the credit reporting agency and the firm that provided the information.

The Bottomline

Starting is the most challenging part of rebuilding credit. However, you can crawl out of having bad credit with commitment and dedication. Also, with the correct information and resources, you can make some progress in your credit score.

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