Help Me Rebuild My Credit

As of February 2011, the average national credit score is a 692. Although this is a very good credit score, it is not near what you need to get the best rates on a loan: 720 used to get the prime rate, but now you need a 760. Even if you have a bad credit score, you can probably get close to a 760 within a year or two by doing some things to help rebuild your credit.

Fix Errors

Finding errors on your report has the potential to fix your score faster than any other method. According to Bankrate.com, 70 percent of credit reports contain some kind of mistake, which can cost you dearly. Pull your report for free from AnnualCreditReport and check everything. Payments mistakenly marked as delinquent are the obvious culprit, but reporting wrong limits also has a significant impact. Credit utilization, or the percentage of your total credit card limit you use, counts under the "amount owed" category of the FICO score calculation worth 30 percent of a score.

Pay Bills on Time

If missed payments on your report are legitimate, there is nothing you can do about them. You can, however, commit to paying future bills on time. Automatic payment can help you avoid missed payments, but make sure you receive a receipt each month for each bill. You might be tempted to sign up for another card to get a zero percent teaser rate, but this could increase your debt burden if you cannot control your spending. At the same time, do not cancel cards, because you want to keep accounts with a good payment history for as long as possible.

Time Frame

Eventually, all negative items fall off your credit report, even bankruptcies and tax liens. The FICO score and lenders usually give the most weight to your last two years of credit, so you do have to wait for the item to leave the report to get good credit. You will need an installment and revolving account, such as a credit card or home equity loan, to maximize your credit mix. If you do not have a credit card, consider a secured card, which is backed by a security deposit.

Advanced Tactics

Getting an elite score may involve more than just paying bills on time. You can raise your credit limit without a credit inquiry, which hurts your score by one to five points, by asking the lender for more credit. Instead of applying for a loan, you can avoid the credit inquiry by finding someone willing to list you as a cosigner. The best ratio of installment to revolving loans is 1:2, according to Mint Life.