Five Proven Ways to Rebuild Credit

It's important to understand a credit score and how it is calculated. The Consumer Financial Protection Bureau defines a credit score as "a prediction of your credit behavior, such as how likely you are to pay back a loan on time, based on information from your credit reports." Your credit history and behavior form the basis of your credit score, including:

• Payment history
• Current unpaid debt
• Length of credit history
• Percentage of available credit used
• Type of debt and when it started
• New applications for credit

Regularly checking in on your credit report is the next step to understanding your financial status. A credit report is a record of your financial history collected by the three major credit bureaus, Equifax, Experian, and TransUnion, and is often used to determine what rates you will pay for loans, including mortgages. Monitoring this report will give you a complete picture of where you stand credit-wise.

You can request a free credit report from the three credit bureaus once every 12 months. You can also get your reports by visiting annualcreditreport.com.

Any errors on your report may lower your score and could prevent you from being approved for loans, apartments, insurance, or even jobs. If you find any inaccurate information in your reports, contact the respective credit bureau and the company that provided the information so they can investigate and correct it as soon as possible.

Review the report for:

• Personal information: Ensure your name, employment information, address, birth date, and social security number are accurate.
• Accounts: Go line-by-line through each listed account to verify the correct status, payment history, limits, and balances.
• Public records: Are you incorrectly linked to any liens, bankruptcies, or foreclosures?
• Inquiries: Confirm any hard inquiries on your credit report were pulled with your authorization.

Credit mix is the various types of credit that you have, and successfully maintaining a more diverse credit mix may reflect more positively on your credit score. A diverse credit mix should include a blend of revolving credit, such as a credit card or home equity line of credit (HELOC), and installment credit, such as mortgages, auto loans, and personal loans. Don't have an installment loan in your current mix? Consider opening a small personal loan to demonstrate your ability to manage different types of credit.

Pay your bills on time, always. This is one of the most important things you can do for your credit score. Even if a bill is due to an unforeseen expense, don't ignore it. If you have trouble paying off a bill in full when it's due, try contacting the company that issued it and ask for more time to pay — but only if there's a real cause for delay (like illness or job loss).

If you are having difficulty keeping up with your bills, consider negotiating a payment plan with each company individually until things get back on track again. Doing this may keep any outstanding balances manageable until they’re paid off completely.

If you have an SECU loan, you can make payments at an SECU branch, an SECU ATM location, or through Member Access. Visit Loan Payments & Payoffs for detailed instructions.

There are two reasons you should keep old lines of credit open and relatively active. One reason is that if you don't use an account, the creditor may close it. If that happens, your reports will have less available credit, which may impact your score. This can lower your score because it results in using a higher percentage of your available limit. You can keep an account active by auto-charging and paying off a monthly bill like a streaming subscription.

The other reason for keeping credit line accounts open is to establish a longer credit history, which will positively impact your credit score.

When you apply for new credit, it will appear as a “hard” inquiry on your credit file and several "hard" inquiries may have a negative impact on your credit score. Typically, inquiries made when shopping for a mortgage or an auto loan are lumped together if requested within the same time period, while each credit card application is treated as separate inquires. To reduce the chances of lowering your credit score, research your lending options and only apply for credit as needed.