How to Repair Your Credit Score After Debt Settlement

If you need credit repair, debt settlement could be one of the reasons. A debt settlement can really damage your credit, and it will take some time to rebuild it successfully. Here are a few steps that you could take to repair your credit score after debt settlement.

Use Credit

The first thing that you have to do is start using credit again. After you have just settled a large amount of debt, your instinct may be to avoid using credit all together. You do not want to have to worry about the possibility of accumulating more debt than you can handle. However, you need to start using credit on a smaller scale again in order to build it back. If you do not use credit, it dries up and your score will suffer from it even more. 

Open up some type of credit account if you can and make a few purchases with it. If you can open a credit card, this might be the easiest route to take. If your credit was too severely damaged by the debt settlement to open a traditional credit card account, you may have to look at other options. For example, you may have to open a secured credit card or a prepaid one. A secured credit card is actually tied to some asset instead of just giving you an unsecured line of credit to use. This makes it safer for the lender and will still allow you to use credit. Once you get this credit account, you should make only a few small purchases periodically. This is not an invitation to max out your credit card. Use it within reason. 

Make Consistent Payments

Once you have charged something on your credit account, you need to make sure that you pay the bill before the due date. Completely pay off the balance each month: do not allow the balances to accumulate interest. You should get in the habit of paying your credit account bills every single month.

In addition to that, you need to make sure to pay all of your other bills on time as well. Your utilities, your car payment, mortgage, and everything else needs to be on time every single month. This can have a huge impact on your credit score overall. When credit bureaus calculate your credit score, as much as 35 percent of the equation is made up of how you pay your bills. Therefore, it is the single largest factor in determining your credit score. 

Mix of Credit

As you start to rebuild your credit, you need to try to get a nice mix of credit accounts. Lenders like to see that you can handle different types of credit before they give you a large loan. For example, if you have a credit card, a store account, a student loan, car loan, and mortgage, you have a nice mix of different types of credit. If you utilize them properly, this can have a nice effect on your credit score. 


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