What Can I Do to Build Up Credit?

Your credit score helps lenders to determine whether to approve or deny you credit. The higher your credit score, the easier it is to obtain new credit. If you have a low credit score due to bankruptcy or other financial difficulties, or if you're just beginning to establish your credit history, there are several things you can do to give your credit score a boost.

Apply for a Secured Credit Card

If you're having trouble getting approved for a major credit card or store card, you may consider applying for a secured card instead. With a secured credit card, you deposit a certain amount of cash with the card issuer, which serves as your available credit line. The initial credit limit is typically very low, usually no more than a few hundred dollars. By making purchases with a secured credit card and paying the balance off each month, you can begin to establish a positive credit history. Depending on the card issuer, you may eventually be able to convert to a regular unsecured credit card.

Pay Bills On Time

Late or missed payments can cause your credit score to take a significant hit. According to myFICO, 35 percent of your credit score is based on your payment history. If you have multiple late payments, significantly delinquent accounts or accounts that have gone to collections, these negative marks can remain on your credit history for up to seven years. If you have past due bills, take action to bring these accounts current. Once your accounts are up to date, take some time to establish a system for paying your bills. Paying your bills on time or early cannot remove negative remarks from your credit but it can lessen their impact over time.

Dispute Credit Report Errors

The Fair Credit Reporting Act (FCRA) establishes guidelines for consumer credit reporting. A key provision of the act allows consumers to dispute inaccurate or incorrect information. The FCRA also entitles consumers to a free copy of their credit report from each of the three major credit reporting bureaus annually. Checking your credit report regularly can help eliminate errors and avoid damage to your credit score. If you find incorrect or inaccurate information, the FCRA allows you to initiate a dispute with the credit reporting bureau. If the investigation finds an error, the reporting bureau must remove it from your credit report.

Considerations

Building good credit takes time and patience. While there are a number of companies that advertise credit repair services, they often turn out to be illegitimate. If you plan to contract the services of a credit repair company, contact your local Better Business Bureau and the attorney general's office in your state to check for consumer complaints. If you're having trouble managing your debt, you may need to consider speaking with a certified credit counselor to get help with your financial situation.