Rebuild Your Credit In 11 Steps
Please understand that there are no quick fixes for improving your score. You may have seen ads for companies that promise, for a fee, to quickly repair your score. Credit repair does not work. Their usual technique is to dispute all negative activity whether negative or not. This results in your score being falsely inflated for only the time the dispute is under review.
Here are some ways to improve your credit score:
- Pay all your bills on time. Delinquent payments, even if only a few days late, and collections can have a major negative impact on your credit score. This applies to all your accounts, including utilities.
- If you have missed payments, get current and stay current. The longer you pay your bills on time after being late, the more your score should increase. Older credit problems count for less, so poor credit performance won't haunt you forever. The impact of past credit problems on your score fades as time passes and as recent good payment patterns show up on your credit report.
- If you are having trouble making ends meet, contact your creditors or a reputable non-profit credit counseling agency like GreenPath. If you can begin to manage your credit and pay on time, your score should gradually improve. Seeking assistance from a credit counseling service will not hurt your score. If you decide to enter a Debt Management Plan, your score may initially go down because lines of credit will be closed.
- Keep balances low on credit cards and other revolving credit. High outstanding credit card debt can negatively impact your score.
- Pay off debt rather than shifting it from one credit card to another via balance transfers. The most effective way to increase your score in this area is by paying down your total revolving (credit card) debt.
- If you have had problems in the past, re-establish your credit history by opening new accounts responsibly and paying them on time.
- Apply for credit only as needed. Don't open accounts for the 15% store discount or for the purpose of more spending.
- Manage credit cards responsibly by keeping balances well under the credit limit. Try to use no more than 50% of your available credit lines. In general, having credit cards and installment loans will raise your score if you make payments in full and on time. People with no credit cards, for example, tend to be higher risk than people who have managed credit cards responsibly.
- Understand that items such as a bankruptcy or foreclosure will have very negative impact on your score, especially over the first 24-36 months. However, it is possible to recover as time passes.
- Don't close unused credit cards as a short-term strategy to raise your score. The scoring model looks at length of credit history, so it helps to keep established accounts that have been open and managed well for five or more years.
- If you have been using credit for only a short time, don't open a lot of new accounts too quickly, as rapid account build-up can look risky to a lender.
Repairing your score is no quick fix, but with a little perseverance it can be accomplished!