Six Steps to Rebuilding Your Credit Score

A mortgage foreclosure, repossession or bankruptcy will cause a severe drop in your credit score. But once you've gotten over the shock and shame of losing your possessions or filing for bankruptcy protection, it's time to rebuild your credit score and improve on your poor credit history.

High Interest Credit Card

Getting a credit card after a bankruptcy is key to rebuilding your credit score and undoing the damage of a discharge. Several options are available to you, including getting a secured credit card from your bank. These require a cash deposit that's paid before you can receive an approval. Another option includes applying for an unsecured credit card designed to help people with bad credit improve their score. These cards typically have high finance fees to compensate for a poor credit rating.

Bad Credit Auto Loan

Major car dealerships and the lenders that finance these automobiles may not accept your application for credit with bad credit, unless you have a co-signer for the loan application. But if you want to get an auto loan without the help of a co-signer, there are auto dealers designed for customers with poor credit. These smaller, privately owned dealership usually offer in-house financing, and they'll approve you for a car loan with no credit history or bad credit.

Authorized Signer

To avoid the hassle of applying for a credit card and risking a credit denial, ask someone that you trust, perhaps a sibling, spouse or parent to add you as an authorized signer on their credit card to help you rebuild your credit history. Being an authorized signer means that the account will show on your credit file. Make sure the person who adds your name has a good payment history, since they're responsible for the monthly payments. A late payment on their part can cause further damage to your rating.

Debt and Credit Scoring

If you maintain other debts after a credit mishap, maintain a good relationship with your creditors to help improve your low credit score. This includes paying down debts and keeping your balances below 30 percent of your credit limit.

Learn from Mistakes

Because your payment history makes up 35 percent of your credit score, late payments and skipped payments have a detrimental affect on your credit rating. Stop bad habits and learn from your mistakes. Paying bills on time requires careful budgeting to ensure you have enough cash to meet your expenses. Keeping up with due dates is also a major factor in avoiding late payments.

Credit Report

Mistakes on your credit file can slow your efforts to rebuild your credit score. Make a point of checking your credit report at least once a year. Annual Credit Reports provides you with one free report from each of the bureaus a year.