There is no quick fix to repair your credit mistakes or build a good credit score from scratch. Your credit score is designed to reflect your long-term history and reliability in managing credit. However, there are some steps you can take that will have an increasing impact on your credit score over time.
Your Credit Report
Information about your credit management will only affect your credit score if it shows up on your credit report. Therefore, it is important to check your credit report and ensure its accuracy. If you have a credit account that does not appear on the report, you are likely missing out on a credit score boost that this account would bring. On the other hand, if your credit report shows inaccurate negative information, such as a false report of a late payment, this is causing your score to be lower than it should be. Get free credit reports through the Annual Credit Report website and dispute errors with the credit bureau that provided the report. Dispute processes are listed at the end of each credit report.
Payment History
About 35 percent of your credit score is based on your payment history on all accounts that appear on your credit report. If you have had missed payments, settled accounts, bankruptcies or court judgments in the past, these all hurt your credit score. If these negative items are accurate, they will remain on your credit report for seven years -- or 10 in the case of some bankruptcies. However, you can counteract their effect and build your credit by developing an on-time payment history in the future. Set up payment reminders or automatic payments on your accounts so you never forget to make a payment. Budget for your bills so you always have money when a payment is due.
Amounts Owed
The second major factor in your credit score is the amount that you owe on your accounts, which counts for about 30 percent of your score. Your credit score not only considers the overall amount owed on each account, but also the ratio of the current balance to the amount originally borrowed or, in the case of a credit card, the amount you are eligible to borrow. Make payments greater than the minimum to reduce your debt quickly and decrease the percentage of your available credit that you are using.
Other Factors
The remaining 35 percent of your credit score looks at the overall length of your credit history, the types of credit you have and how much new credit you have been obtaining recently. Although there is not much you can do to improve your score in this area, there are some behaviors to avoid. Keep your oldest accounts open to maintain your long credit history. Have a balance of a few types of accounts, including credit cards and installment loans, such as a mortgage, auto loan, student loan or personal loan. Refrain from applying for credit and opening new accounts unless you need them.
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