Fastest Way to Rebuild Credit

Credit scores are confusing to many people, and once damaged, a bad credit score can be hard to repair. There are some steps that anyone can take to help repair their credit, whether it was a foreclosure, bankruptcy or even just a few small mistakes that piled up over time that drove your credit down. Keep in mind that even the fastest credit rebuilding techniques will take years, especially for very bad credit.

Cease Negative Credit Activity

Credit cards are the downfall of many Americans. Stop using credit cards. If you really need to, freeze them in a glass of water so that you cannot use them easily. If you have the numbers saved on your computer for online shopping, delete them. Work out a budget with your family and follow it carefully, using only cash or debit cards, depending on what works best for you (budget planner in the References section). You should also stop applying for credit, which affects your credit score negatively. If you have more than four credit cards, cancel the ones with the lowest limits as you pay them off until you have between one and four.

Keep things Steady

For the first couple of years after your credit has been damaged, things can be rocky. The best thing you can do is to keep things as steady as possible. If you have any debt or mandatory payments (like alimony or child support), make them on time, every time. If you have credit card debt, work hard to bring your debt down, putting as much extra money as possible onto your credit cards, starting with the card with the lowest balance and letting the payments "snowball." Dave Ramsey has plenty of advice on getting out of debt.

Rack up the Positive Points

As your debt drops, maintain your credit cards by making a small purchase once a month and paying it off as soon as possible. This will show the credit reporting agencies that the credit cards are active. The higher your debt to credit ratio (meaning the more money you are allowed to borrow, vs. the amount you currently are borrowing), the better for you. Watch out for credit cards like Capital One, which may refuse to report your credit limit. In these cases, the credit reporting agencies can only go by your highest recorded balance, which may be significantly lower. By making steady payments and keeping your credit card balances as low as possible, preferably at zero, your credit will rise steadily.