5 Things Not To Do When You Want To Rebuild Your Credit

Don't Fall Into These Common Traps

5 Things Not To Do When You Want To Rebuild Your Credit
February 10, 2017

Is your credit rating in the dumps? Recognizing that you have a problem is the first step toward credit redemption. However, there are many pitfalls along the way that can delay (or even completely derail) your path toward improved credit. Five of the more important ones are listed below.

1. Fail to Check Your Credit Reports – If you don't check your credit periodically, how can you tell if you are making progress? You can check your credit score and read your credit report for free within minutes with Credit Manager by MoneyTips. You are also entitled to one free credit report per year from each of the three major credit bureaus: Experian, TransUnion, and Equifax. Make sure that you check the reports for any errors that could hamper your credit-rebuilding task. Even an incorrectly reported credit limit can affect your score (see #3 below).

You can order all three bureaus' reports in a matter of minutes using Credit Manager by MoneyTips to do a comprehensive check on your credit. Keep in mind that the reported information may be slightly different among the agencies, and one bureau may have an error that is independently dragging down your score.

2. Miss a Payment – Missing a credit card payment is a bad idea even when your credit is superior. When rebuilding credit, it can be a near-fatal mistake. You cannot afford any blemishes during a rebuilding phase. Experian Director of Public Education Rod Griffin explains that missed payments stay on your credit report for seven years. "Credit reports are credit history," says Griffin. "So if you missed the payment today, seven years from today that's going to fall off the credit report."

Make sure you make at least the minimum monthly payment to all creditors, and if there are extenuating circumstances that make it impossible to make a payment, call your creditor to discuss options. They would rather work out a payment plan than write off your debt as uncollectable.

3. Close Out Old Accounts – Closing old accounts after paying them off may sound like a good idea, but it actually lowers your credit score by reducing your credit utilization (the amount of credit you use compared to the total amount you have available). If you move closer to the top of your credit limit — even if that limit is lower than it used to be — you represent a greater risk to the creditors. "Generally, when you close a card account, it's going to hurt your credit, explains NerdWallet Credit and Banking Expert Sean McQuay. "Because it's decreasing your overall credit line, which basically signals [that] a bank trusts you less."

The age of an account also factors into your score, with older accounts carrying more positive weight. As McQuay points out, closing an old account is therefore "decreasing [your] average history of accounts. So it's saying you have had less history dealing with banks." Thus closing old, paid-up accounts carries a double negative impact that you should avoid.

4. Open New Accounts – If closing accounts is bad, is it good to open new accounts? The answer is usually no. Opening new accounts requires a hard pull on your credit, which will lower your credit score slightly — and multiple pulls tell lenders you are entering even more into risky territory. You don’t want to completely cut off your credit or expand it significantly — just manage the accounts you have with greater care.

5. Look for an Easy Way Out – Debt is like excess weight — you probably didn't gain it all in a short time and you won't get rid of it in a short time, either. There are plenty of vendors offering quick fixes for damaged credit. Be skeptical of quick-fix claims. Ask yourself what a vendor can do to repair your credit that you can't do for yourself, and research their claims and history in great detail.

While the above items are all important to avoid when rebuilding credit, there is one thing you can do that is even worse — to not attempt to rebuild your credit at all. It's not an easy task, but don't give up. Be disciplined and stick to your plan, and let positive momentum help you on your journey toward superior credit.

If you would like to monitor your credit to prevent identity theft and see your credit reports and scores, check out our credit monitoring service.

Photo ©iStockphoto.com/gpalmer1477

  Conversation   |   27 Comments

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Zanna | 12.08.16 @ 20:04
I didn't realize how bad it was to close old credit card accounts. We started to apply for a loan and I closed several cards out, thinking it would help. We nearly got denied for the loan because of it!
Daniel | 12.08.16 @ 20:09
Falling into the hole and needing to rebuild can be long tough road, following steps like these are a great start to getting back on track
Erin | 12.08.16 @ 21:41
I didn't realize that closing old accounts had such a negative effect on your credit score. It seems like you have to hit that sweet spot of neither having too many nor too few accounts at one time. It looks like, with some careful monitoring and a little perseverance, getting a good credit reputation can be achieved for just about anyone. Thanks for the great tips.
Brittany | 12.08.16 @ 22:14
This is actually really great. There's a couple of things that I never would have thought about that I probably would have made the mistake of doing myself.
Chrisitna | 12.08.16 @ 23:53
Great reminder and tips. So important to keep an eye on your credit report at all times!
Alec | 12.09.16 @ 00:48
I read up about some of this very recently. I just opened my own credit card in my own name. Before, I was using my husband's. It's so easy to mess up and lower your credit score without even knowing, like with closing old accounts and missing payments. It's pretty scary. But then again, I guess it's supposed to be to try to keep people from using their credit cards like crazy unless they need to!
Crystal | 12.09.16 @ 13:56
I was under the impression that regularly checking your credit reports was a bad idea as it lowered your score. This was helpful info. Thanks!
Annsheriett | 06.17.17 @ 11:12
I need my credit fixes and I am going to take your advice and start checking my credit report so I can get a lot of those negative things move of of my credit now. Thank you for these tip.
John | 06.19.17 @ 02:02
Ill start Now, Why put off what can help improve your existance.
Daniel | 06.04.18 @ 23:39
I had a major stroke that knocked my credit off track. I am working hard to bring things back in good shape.
Juley | 06.08.18 @ 07:50
Thanks for the update and for the imformation.
William | 06.20.18 @ 02:19
I was in the 700s for a few years. Now I am back in a hole, because of 3 issues, mostly beyond my control. First, I closed off many accounts that I didn't need, some of them older store credit cards (Sears, JCPenny, etc). Then recently I purchased $40 of stuff on a Lowes card and immediately sent a payment of $25 for it before opening a bill. Then they set the minimum payment at $27 just after I had already sent my payment of $25... I never found out until a month later when they reduced my credit line from $5,000 to $100!!! And of course this all happened when I had moved around for work that wasn't stable, while paying two rents/mortgages. I spent $4,000 to relocate but ran out of work. My tenants left my home after the selling season. I had no unemployment aid, and there were zero jobs in my field locally or where I moved. Then my health deteriorated from stress and complete lack of hope for income of any kind. My body is ready to collapse on itself like Stephen Hawking and my 18-year-old car is worn out to hell. Lesson is... Don't bring an engineering degree plus 5 years of experience to Alabama. Avoid the state like the plague!
Vanna | 07.20.18 @ 04:27
About six or seven years ago my identity was stolen. I haven’t used credit in years. I still have trouble with someone trying to open credit card accounts in my name.
Abimbola | 08.02.18 @ 05:44
My credit score is 582. How can I build it up to make it 710?
Carol | 08.23.18 @ 17:42
The Credit One and one old Capital One account on my credit report were taken out in my name by a scammer who had enough of my information to do so. He ran up bills and refused to pay. I have an extremely limited income and could not pay either so they went into collection.
Robert | 08.26.18 @ 09:39
Forget the bad credit score; I have a son and his mother who are homeless. I need a loan to pay for a place to stay for Debbie and my boy who is homeless.
Jessica | 09.03.18 @ 02:40
Identity theft takes a long time to recover from.
Wanda | 09.03.18 @ 17:45
I am working with a credit repair company now. Since my husband passed away, I have had so much to take care of. I am really trying but it's difficult at times. I know I will get my credit to a good score again. I just need a little help at times.
Charla | 09.12.18 @ 08:30
I never realized how many things depended on your credit score.
Lashaunda | 10.30.18 @ 12:07
It akes a long time to recover it.
Melissa | 02.03.19 @ 13:37
What about checking our credit scores frequently? Does that LOWER our credit number?
William | 02.09.19 @ 18:07
Important to remember that "Checking your own credit yourself is harmless; It's when OTHERS check it with a 'HARD PULL' that your score takes a slight hit, or heavy hit depending on the financed amount involved"
William | 02.09.19 @ 18:22
When you have a hardship such as a huge medical emergency, or a long lasting streak of unemployment, you may have no choice but to further lower your score until you can refinance with your creditors. Usually this involves missing several payments until a mortgage modification or credit card debt settlement is negotiated. In my case, I was out of work for a 3rd time, now lasting for nearly 2 years after having just worked 2 years straight without vacation at my highest pay rate to date. Unfortunately I had to pay for relocation, pay for two residences, forced into buying health insurance, sewer connection /pump & Central AC in my house broke, all while I was holding out for a job paying at least half what I earned 10 years ago. But I managed to keep it all up by using my credit cards & last of my retirement 401k. Now it's time to rebuild while working for lowest pay ever earned. Feels like slavery, but hopefully mortgage will be modified soon & I can settle debt repayment by 50% on my 2 full credit lines.
Fred | 03.04.20 @ 13:49
I'm very delinguent on 3 card account's and I'm fixing to pay them all off. I don't know if that's the right thing to do at this point after reading suggestions on credit repair
Herbert | 05.15.20 @ 12:48
Very helpful
Mary | 09.02.20 @ 00:38
I do not have a credit card.
Mary | 09.02.20 @ 00:40
I do not have credit card.
$commenter.renderDisplayableName() | 10.30.20 @ 08:14