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How to Rebuild Your Credit

From our Financial Wellness Partners at Mountain America Credit Union


A good credit score can help open a lot of financial doors in your life. It can help you purchase your dream home, buy that car you've always wanted or qualify for a larger line of credit. However, the credit field can sometimes be tricky to navigate.

You've likely seen ads for free credit score checkers or maybe your financial institution provides you with access to your credit score. But once you've entered all your information, what do you need to know about your number? Let's break it down, starting with how you build credit.

Your credit score is an indicator of your overall financial well-being. It lets lenders know how reliable you are as a borrower. Scores typically range between 300 and 850, with 850 being excellent. The higher your score, the better financing options you get for home, car and personal loans.

Your score is calculated using five categories of your personal financial data: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).

Now that you know how your score is calculated, you can start to see which areas to improve on—and that's a good thing! No matter who you are or what your financial situation is, you can always rebuild, or improve, your credit score. Here's how to start:

Set a realistic timeline

Start by creating a realistic and detailed timeline for yourself. Prevent frustration by knowing the answers to a few questions:

How long does it take to build credit?

If you're starting from scratch, it can take six months to a year.

How long does it take to improve credit?

Depending on what's impacting your current score, it could take as little as one or two months, or as long as two years.

How long does it take to rebuild credit?

If you're totally rebuilding your credit, say after a bankruptcy filing, it can take seven to 10 years to totally wipe that from your history. That being said, you can start to make small improvements, form new spending habits, and even find credit cards to rebuild credit. (More on those a little later.)

If you’re having trouble understanding what goals to set for yourself, consider meeting with a financial advisor. They can give you an idea of your current financial situation and help you identify and prioritize goals.

Understand your credit

Once you've established a timeline, take action! Conduct a self-audit of your own credit—start by reviewing your credit report. You're legally entitled to one free credit check each year. Visit to download a free report from each of the three major credit bureaus: Equifax, Experian and TransUnion. If you have a loan or checking account at Mountain America Credit Union, easily access your credit score for free on our mobile app or in online banking.

Credit reports may seem dense at first. But it’s important to browse through these reports with a fine-tooth comb. Know how to find errors in your credit report. If you see something that doesn't look right, reach out to the reporting bureau immediately about getting it resolved. Doing so can boost your overall credit score quickly.

Pay all your bills

Next, make a concentrated effort to pay any late or overdue bills. Payment history makes up the biggest portion of your credit score and getting all your accounts up to date can make a big difference.

If you need a little help with this, speak with the creditor in question and ask about payment plans that can get you back on schedule.

In your overall journey to better credit, this step provides a great opportunity to build healthy habits. Find out when each of your bills are due and add a reminder to your calendar or personal planner to pay them in full and on time, or try automating your payments so you never miss a due date.

Lower your debt

After payment history, amounts owed is the next biggest portion of your credit score. The amount of debt you owe compared to the amount of credit available, also known as your debt-utilization-ratio, lets lenders know how much you rely on credit—and how quickly you typically pay it back.

Look at all your debts—including credit cards, car loans, student loans, etc.—and determine how best to pay them off. Some people prefer to tackle debts with the highest interest rates first to save money. This is known as the avalanche method. Others prefer starting with the smallest debts and rolling those payments into the bigger ones as the debts are paid off. This is known as the snowball method. The ideal method is the one that works best for you. And remember, this by no means needs to be immediate. Rebuilding credit doesn't happen overnight.

Create a budget, and stick to it

This sounds simple, but creating a thorough budget can be a hefty project. Start by adding up all your income and subtracting your recurring monthly expenses. Any leftover could be put toward debt and savings.

If you have a partner, ask them to do it with you so the entire household gets a good grasp of what's going on.

This is particularly helpful if you're wondering how to build credit after bankruptcy. You want to demonstrate to future lenders that you understand how much you make, how much you spend and how you plan to pay all future bills in full and on time.

Fill your wallet with the right cards

Part of building and rebuilding credit includes becoming more credit card savvy. That means knowing which cards are beneficial for you and which ones may not serve your needs. While you may already have a favorite, look into the perks offered by each card and create a spending plan to responsibly earn rewards.

It’s smart to keep your oldest credit card because that contributes to your length of credit history. In general, you should avoid closing cards because that may mess with your debt-utilization-ratio. However, if you have credit cards with extremely high interest rates or a ton of fees, these may be cards you’ll want to pay off and close.

If you're worried about overspending, or concerned that you won't qualify for a credit card, look into credit cards that are meant to help rebuild credit. Secured credit cards, for example, connect to a savings account. That collateral ensures you won't overspend and the credit card will otherwise function like any other.

Be patient

Finally, keep in mind that rebuilding good credit is not a race. It's different for everyone and the journey depends on your personal situation and financial history. The important thing is to take steps toward financial freedom and independence, and that's something to celebrate!

If you're still feeling lost or confused, schedule an appointment with a Mountain America expert. They are here to help you reach your financial goals.

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