How to Improve My Poor Credit Score

While it can take many months or years to develop a good credit score, you can damage it fairly easily. If your credit score is poor, you are going to have to put in time and effort to repair it. The Fair Isaac Corp., developers of the well-known FICO score, uses five categories to compute credit scores. To improve your rating, you must work on your payment history, the amount you owe, the length of your credit history, the types of credit you use and the amount of your new credit.

Instructions

1

Make all payments on time. Payment history is the largest portion of your credit score, at 35 percent, and the single best way to improve your score. Making payments on time does not immediately boost your score, but consistent on-time payments will gradually improve the number.

2

Wait for delinquent accounts or negative public records, such as bankruptcy, to age out of your credit history. This can take between seven and 10 years. While the negative effect of these items diminishes over time, as long as they are on your credit report they can hurt your score.

3

Pay down your debt. The second-largest factor of your FICO score, worth 30 percent, is the amount of your debt. The lower you can get the total amount of your debt, the more it will help your credit score. Part of this equation is your credit utilization, or the percentage of your available credit in use at any given point. Lowering your credit utilization percentage can also give your credit score a boost.

4

Keep your older accounts open. The length of your credit history makes up 15 percent of your FICO score. The longer you can keep your accounts open, the more they stand to benefit your credit score. While closed accounts can remain on your report for several years, once they drop off, the age and payment history no longer influence your score. Closing accounts can also hurt your score by increasing your credit utilization percentage.

5

Avoid applying for new credit. Every time you apply for new credit, your credit report reflects this inquiry for two years. New credit comprises 10 percent of your FICO score, so avoiding new inquiries can help your poor credit score.

6

Open various types of accounts if you need new credit. The types of credit you use make up 10 percent of your FICO score. Having a diverse collection of account types can help raise your score. For example, if you have only credit cards on your credit report, adding a personal loan or an installment loan, such as a car loan, could benefit your score.