How to Restore Your Credit After Paying Off All of Your Debts

Building good credit requires a significant effort and some patience on your part. If you've worked hard to get out of debt, you may have to work just as hard to rebuild your credit score. If you're debt-free but your credit is still suffering, there are some steps you can take to begin restoring your credit.

Instructions

1

Check your credit report. Request copies of your credit report from each of the three major reporting bureaus, Equifax, Experian, and TransUnion, and go over each one with a fine-tooth comb. You want to make sure that all of your accounts are being reported accurately and that there is no negative or incorrect information contained in your report. If there are any inaccuracies, take the necessary steps to dispute them or have the negative information removed altogether.

2

Pay your bills on time. If you have yet to learn how to create a budget, now is the time. Take the time to calculate your total monthly income versus your total monthly expenses. Create a system for paying bills that will ensure that your bills are paid on time each month. Thirty-five percent of your FICO credit score is based on your payment history, and if you consistently have late or missed payments on your credit history, your score will continue to suffer.

3

Use your credit wisely. Don't take on any new debt, unless it's something you can and will pay in full each month. If you choose to keep one credit card active, make sure you can pay the balance off each month. Thirty percent of your FICO score is determined by the amount you owe, so even if you have high credit limits, it's best to keep your actual balances low.

4

Keep older accounts open and active. Fifteen percent of your FICO score is based on the length of your account history, so if you have older accounts in good standing, it may benefit you to simply leave them open and only use them often enough to keep them active.

5

Maintain a diverse mix of account types but keep inquiries for new lines of credit to a minimum. The remaining 20 percent of your FICO score is based on the types of credit you have and how often you're applying for new credit. Frequent inquiries from lenders can have a negative impact on your score as it gives the impression that you are credit-seeking and possibly a high risk.