The Best Way to Raise My Bad Credit Score

A bad credit score can cause you to be denied credit, and to pay higher interest rates and insurance premiums. A credit score is calculated using five different areas: late payment history, credit utilization, types of credit, new credit and age of credit history. While you can't easily erase a history of late payments, you can lower your credit utilization. Credit utilization, or the amount you have charged in relation to your credit balance, accounts for 30 percent of your credit score.

Instructions

Best Way to Raise Credit Score

1

Contact your credit card companies and ask for your credit limit, as well as your credit balance. Ask what day the company reports accounts to the credit bureaus. Write this information down.

2

Pay as much as possible on the credit cards. Your goal is to reduce the balances on the cards to between one and 20 percent of the credit limit. In other words, if your credit limit is $1000, you should have a balance under $200. The calculation is credit limit x .20. Make your payments before the date the credit card company reports to the credit agencies.

3

Check your credit score after the companies have reported the new balance to the credit agencies. As soon as the new balance is reported, your credit score will rise.

Additional Techniques to Raise Credit Score

4

Make all payments on time. Your payment history accounts for 35 percent of your credit score. The most weight on your credit score is within the previous 12 months, and after 24 months, the damage from missed payments is greatly reduced.

5

Order your credit report, and look for any errors in the reporting. You have the legal right to dispute items on your credit report that are not reported properly. Focus on the negative accounts, and dispute any account with incorrect information. Look at the balance, reported late payments, dates listed, and type of account. Dispute by writing a brief letter including your name, Social Security number, address, and list each account with incorrect information. Send the letter to the address listed on the credit report. Each item that is corrected or removed may improve your credit score.

6

Limit your applications for new credit. Ten percent of your credit score is based on new credit. If you apply for new credit or have opened new accounts in the previous six months, your credit score will drop. After six months, the score will recover.

7

Add positive credit if you do not have any accounts currently reporting. Your credit score cannot improve without positive credit being added. Get a secured credit card if necessary. Keep the balance under 20 percent, and make all payments on time. Your credit score will take a hit initially for the new credit, but after six months the score will recover and begin to go up each month.