Repairing A Bad Credit Score

There are many possible reasons for a bad credit score. Bad financial advice, youthful mistakes, unexpected events, and sometimes just plain wrong decisions can all play a part. If you have a poor score, don’t give up. Your rating can be improved and eventually completely remade. It won’t happen overnight, and there is no easy fix: if you receive a dodgy email containing offers to repair everything in two weeks, run like Usain Bolt because that’s a scam. You can do it, though, and the sooner you start, the sooner you’ll reap the benefits that come with better credit.

Here are a few steps to help you get back on track.

Pay Attention to Your Card Balances - One of the biggest factors that affect your score is the amount of revolving credit you have compared to how much you are using. Even if you pay your bill in full every month, your utilization ratio might be high. Some card issuers report the balance on your statement to the bureau. The smaller the percentage, 30% or less, the better your rating. So paying down balances, and keeping them as low as possible, will start improving your score.

Kill Multiple Credit Card Balances - If you have more cards than a magician in Las Vegas, taking that strategy above a step further might help. It's a good idea to eliminate smaller balances if you have multiple cards. The number of cards you have that are carrying a balance affects your score. Pick a card or two, preferably the ones with the best interest rates, and stick to them for use. Charging $30 here and there on a bunch of cards, and thereby creating many balances, is hurting your score.

Compile all those cards with small balances and pay them off as soon as possible.

Don't Worry About Old Debt - You probably know that old debt on your credit report is a bad thing. Even though negative items may hurt, jumping on the phone in the hopes of getting old accounts removed from your report the moment you have paid off an old debt is usually pointless.

Most, if not all of the old issues will disappear from your report after seven years. It is better to aim your energy at getting back in the green since good debt -- debt that you have handled well and paid as agreed - is good for your credit. The longer the history of good debt, the better your score. It's best to keep any good accounts open as long as possible.

Time Those Checks - It may seem odd, but every time you get a credit check, it results in a small ding on your score, and that mark lasts for one year!

So if you're out there looking into a car loan, student loan, or home loan, get all your rate shopping done within a 30-day period. Why 30 days? Most lenders use your FICO score. When shopping for mortgages, auto or student loans, FICO uses scoring formulas that allow you to make multiple applications within a 30-day period, even though only you eventually take out just one loan.

Point to note - 30 days may be the norm, but the exact number of days you have depends heavily on the scoring software used by the lender. If the creditor is using the latest forms of scoring software, you should have at least 30 days, or perhaps even 45 days. If the lender is using older software, you might only have 14 days! Older software may not allow multiple inquiries for a student loan, no matter how close together the applications are. It’s worth asking the lender what system they are using before agreeing to a credit check.

Pay bills on time - Okay. Advising you that paying your bills on time is a good thing might seem as obvious as a white whale on a black background, but it has to be said. Pay your bills on time.

Your credit report determines your score, and failing to pay bills on time, or worse yet, not paying them at all, damages your report and therefore hurts your score. Just make those monotonous payments on time, month after month, and you'll be okay. Pay your bills on time using a credit card, and then pay the card balance on time. You’re not paying any more, but you get the positive impact of two on-time payments!

Not much more to say on this point.

No Risky Business - One of the absolute best ways to stay on the road to improvement is simple; don't do anything stupid.

I know, I know, your buddy has got the deal of the century. All you have to do is invest in his newly invented left-handed toothbrushes, and you're in the money. Or maybe you need to rent a car on your weekend excursion, and buzzing around town in anything less than a Lamborghini Gallardo, all while eating caviar-covered crackers and cleaning the windshield with champagne, just seems unacceptable.

Some words of ancient wisdom -- don't do it.

Keeping Track - As you're on the yellow-brick road to improving your credit score, it's not a bad idea to keep track of your progress. You're entitled to a free report once every 12 months! Print or download the results, and reward yourself for any improvements!