If your timeshare affected your credit, you can rebuild credit with these 5 strategies.
Your credit score is a complex calculation based on reported credit factors. Timeshares can affect credit scores. And unfortunately, they can stay on your credit reports for a long time. Most items stick around for seven years, but Chapter 7 bankruptcy hangs around for 10 years. If your credit been harmed by timeshares or other factors, it’s time to work to rebuild credit.
According to Experian, one of the three major credit reporting companies, “Rebuilding your credit doesn’t happen overnight. It takes time to re-establish a good payment history, pay down the debts you may have and let negative information cycle off your credit report.” That’s why it makes sense to start to rebuild credit sooner rather than later. Here are some top tips to guide you.
Make Payments on Time
On-time payments are a major factor in your credit score. Late payments pull you down while on-time payments lift you up. So, when you’re working to rebuild credit, you definitely want to ensure you’re making payments on time.
We know this can be difficult, especially when you’re struggling financially. However, it’s so important. Take steps to avoid late payments such as scheduling automated payments in advance. You can also set reminders on your phone or keep a calendar. Or do all three. It’s that important!
Keep Balances Low
Credit utilization is another key factor in your credit score. Credit utilization is a ratio of available credit (the spending limit on your credit card, for example) to your balance. And typically, lenders want this ratio to be less than 30%. That means if your credit limit is $1000, you’d want to keep your balances below $333.
Why does this matter? Lenders know that people carrying high balances on their cards are at greater risk for default than those with lower credit utilization. And they look at this consideration in two ways: per-card and overall. Per-card refers to the credit utilization on a single card while overall reflects all available credit and balances. When you are trying to rebuild credit, you should keep them both low. If you have one card maxed out, even if your overall credit utilization is low, that maxed out card can still impact your score.
To improve your credit utilization, try these strategies. Spread your debt out evenly across cards. Consider opening a new card and transferring your balance. Make sure you don’t accidentally go over by setting an alert on your card. Or consider asking your bank to increase your limit. But don’t then turn around and use that extra credit!
Reduce or Consolidate Debt
Carrying high levels of debt reduces your credit score. So, when trying to rebuild credit, you want to reduce your debt. Of course, that’s easier said than done. Start with a clear and reasonable budget for paying down debt. And make those payments on time.
If you have lots of high-interest credit cards, it may make sense to consider a consolidation loan with a lower interest rate. A lower interest rate translates to lower interest charges and helps you pay off debt faster. Plus, a single payment may be easier for you to handle.
Establish Positive Credit Activity
Lenders want to see a pattern of positive credit activity over time. Meaning, you want to make sure your credit report shows just that. If you have existing credit cards, great. Make your payments on time and keep your credit utilization low. If you don’t have existing credit cards, you may want to consider one.
If your credit is currently poor, you may have difficulty getting approved. Try to get a gas card or store card that may be easier to be approved for. Or become an authorized user on the account of someone you know and trust. A secured credit card is another option. Unlike a traditional card, a secured card is backed by money you place in an account. It allows you to build credit without risk for your lender.
When seeking new credit accounts, be strategic. Each hard inquiry will have a negative impact on your score so proceed carefully.
Stay In Control
Sometimes your finances may feel out of your control, especially when you’ve been dealing with timeshare issues. But you can regain and take control, even if you have a low credit score and negative marks from the past. Start by knowing what’s on your credit report. You can’t fix what you don’t know about. Did you know you’re entitled to a free annual credit report from the three major reporting agencies? Click here to find out more.
Sometimes, credit reports have errors, so make sure that everything on your report is accurate. Since the timeshare industry is known for false reporting, you’ll want to be extra careful. Then take steps to correct those inaccuracies.
By following these steps to rebuild credit, you can truly enjoy your life after timeshare cancellation. Still stuck in a timeshare you’ve outgrown or can’t afford? We can help. We specialize in helping people exit their timeshares safely, ethically, and forever. Contact us for a free consultation.