Credit Myth #49 - The best way to rebuild credit is to open new accounts.

There is a big difference between "building" and "rebuilding" credit. For someone just starting out looking to build credit, absolutely opening accounts (like credit cards) is a great approach. The problem I see very often are those looking to rebuild incorrectly believing that the best approach is to open new accounts. You see this advice given often when someone posts about wanting to rebuild. Almost all of the responses suggest opening new accounts.

The term "rebuild" by definition means a dirty file, as one is looking to return back to a previously strong place. If one has a dirty file, the best approach to rebuilding it is to address the negative items present. We discuss common methods such as PFD (Pay For Delete) and goodwill letters on this sub often as approaches used to target the removal of negative items on your credit report. This should be the number one focus of a rebuild: The elimination of any/all negative items from your reports. Everything else is far secondary to moving from a dirty scorecard to a clean scorecard.

Too often I see people looking for advice on rebuilding, and all of the responses are geared toward opening new accounts... "Consider opening Self, Chime, or [insert gimmick credit-builder product here]." Sometimes you'll see recommendations to take out a loan to build credit. All of these new account suggestions don't address the major problem at hand, the dirty file.

A good way to think of rebuilding is like a car that once ran great, but currently doesn't run at all. Maybe it needs a new transmission or an engine rebuild for example. The "fix" of course would be to address the problem(s) to get the car running again, right? That's what removing negative items from your credit report accomplishes. Adding new accounts would be the equivalent of putting a new set of tires on this car that doesn't run and getting it detailed. Are they improvements? Sure, but they don't actually solve the problem.

Now this isn't to say that there isn't any value in opening new accounts for someone rebuilding... but that approach should be in addition to the targeting the removal of negative items. The focus needs to be moving from a dirty to a clean file.