How to Re-establish Credit and Replace Bad-Credit Habits

Bad credit does not have to be a life sentence. Credit history is no doubt an integral part of everyday life, it’s just about impossible to avoid.

A major component to rebuilding credit history is to re-establish good credit. That means you must replace any credit-damaging habits with new, better ones to re-establish credit.

“If you do what you always did, you’ll get what you always got.”

Here are 4 ways to re-establish credit and replace bad credit habits:

1. Catch up on past due bills

Past due accounts will significantly lower credit scores. In fact, one late payment can lower a good credit score by as much as 100 points.  Typically, creditors report late payments in one of these categories:

  • 30-days late
  • 60-days late
  • 90-days late
  • 120-days late
  • 150-days late

At 180 days late the creditor may charge-off the account (written off as a loss because of severe delinquency). But the important thing to understand is that you can recover from a late payment prior to charge-off by getting and staying current with your payments.
Paying bills on time will play a huge part in re-establishing credit.

Your ability to successfully manage debt goes a long way in credit scoring. Late payments hurt, but if you can get current do so immediately. Your credit score will begin to recover once payments are made on-time.

2. Establish New Credit Habits

New credit habits such as making more than the minimum payment and never missing a payment will help re-establish credit. Bad credit won’t improve until you begin to show creditors that you have what it takes to build a good score.

Conventional wisdom would be to spend only what you can afford but in addition, you should never spend more than 30% of your available credit. However, to re-establish good credit, aim for using only 10 percent of your available credit limit.

Put as much room as possible between your credit limit and account balance.

Keeping balances low and not maxing out credit cards will help rebuild credit. Replace old credit-destructive habits with new ones. Charge only what you can afford.

3. Steer clear of too many credit cards

Consumers seeking to re-establish credit may be tempted by any credit card offer. Don’t let this be you. While avoiding credit cards make it more difficult to re-establish credit, you don’t want to over do it in applying for too many credit cards. Using a credit card the right way will help you establish a positive payment history and put you on track to building a better credit score.

Don’t apply for too many credit cards at once. Each credit inquiry can decrease your credit score, making it harder to get approved for another account.

You should also avoid prepaid credit cards as a means to re-establish bad credit. While you can get a prepaid credit card regardless of your credit history, they do nothing to re-establish your credit. And, they don’t report to credit bureaus — because they’re not credit cards.

Another reason not to take on too many credit cards during your re-establishing period is that it can get hard to manage your balances and payments. Two or three credit cards is plenty to get you started if you don’t currently have positive credit accounts.

4. Apply for Easy to Get Credit Cards

A low credit score can make it more difficult to get new credit but there are a few options. Consider easy to get credit cards to avoid multiple credit applications. Too many applications for credit not only negatively affect your credit score, it may also be a red flag to your current creditors, causing them to view you as a risk.

A great choice for new credit is the OpenSky® Secured Visa® Credit Card. There is no credit check and no checking account required. You determine your own credit limit with an FDIC-Insured deposit ranging from $200 to $3,000.

A retail credit card is an alternative choice for re-establishing credit if you cannot get a major credit card. The Fingerhut® retail credit card helps make shopping possible for more consumers through their easy approval credit card and low monthly payments. Fingerhut carries trust brand names in multiple categories from electronics to apparel to furniture and best of all, they report monthly to the credit bureaus. There is an easy application online.

Fingerhut Credit Account

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OpenSky® Secured Visa® Credit Card

  • No credit check necessary and no checking account required; apply in less than 5 minutes.
  • Choose your credit line as low as $200 up to $3000, secured by a fully-refundable* security deposit.
  • Build credit quickly. OpenSky reports to all 3 major credit bureaus.
  • Security deposit needs to be submitted before the credit card can be issued.
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