Tips for Repairing Your Credit
Learn how to repair your credit with a savings account in a few quick steps
When you want to avoid debt, creating a realistic budget and sticking to it can help you stay within your spending limits and save money. Start by gathering information about your current expenses and spending habits and then look for ways to cut back. But what do you do when you're trying to rebuild your credit score and pay off debt? Repairing your credit is actually a similar process to avoiding debt, and opening a savings account plays a key role in your future financial stability.
First, start repairing your credit by paying off debts
The first step in repairing your credit is to make sure your good credit is being reported. Not all creditors regularly communicate to the credit bureau when you make on-time payments. If you are denied an application due to "insufficient credit", call your creditors and ask them to report this information on a quarterly basis. If they won't, consider opening a card with a credit card company that is willing to report your positive progress. Also, it's a good idea to check your credit report at least once a year to see your progress. For more information on obtaining your credit report and fixing any errors, visit the Consumer Financial Protection Bureau website and contact one of the major credit reporting agencies like Experian, Equifax or TransUnion.
Because it isn't realistic to stop spending altogether, try to restrict yourself to credit card purchases you know you can pay off at the end of the month. Limit yourself to two to three secure credit cards with competitive rates as too many new credit applications will raise flags with potential creditors.
As you pay off debt and rebuild your credit, make sure you're making minimum payments on all your debts - whether they are credit cards, school loans, auto loans or anything else. Choose the debt with the highest interest rate to pay off first and contribute a little extra to those payments each month. After it's paid off, take the extra money and contribute it to a new debt. Focus on paying that debt down in full. Since you'll be making fewer payments, you should have extra income in the amount of the original debt payment each month. Deposit this into savings account and continue the cycle until you've paid down all your debts and built up your savings.
Next, repair credit with a savings account
Depositing the surplus money into a savings account after paying down your debt means you'll be less likely to use it for impulse purchases. Plus, you'll be building a positive cash reserve, which shows creditors you are working to save and you have the funds to make payments. Opening a savings account also means you'll have funds available to take care of your family and pay off debts in case an unexpected event or expense arises. You may even want to set up an emergency savings account in addition to your primary savings. This account should have enough income to cover your living expenses for three to six months.
Here are some articles with tips to save money and contribute to your savings:
Finally, consider opening a savings account with Citizens Bank
Opening a savings account is an important aspect of repairing your credit, but it only helps if you make steady contributions. Open a Citizens Bank savings account and set up automatic transfers as soon as your paycheck is deposited so a portion of your income goes directly to savings. Rebuild your credit and grow your savings with each deposit. For more information about our savings account options, speak to a Citizens Bank representative at 1-877-360-2472 or visit a local branch .