The Steps to Repair Your Credit Score

Fixing your credit score is a process and it takes time to build a good score. But despite the process, a good credit rating is worth the effort. People with high credit scores can receive favorable rates and terms on home loans or automobile loans, and a good rate may qualify you for lower rates on insurance policies.

Analyze Credit Report

Removing derogatory statements from your personal credit report can help repair your damaged credit score. Lenders often report negative information such as collection accounts or deficiency judgments after a repossession. Having this information on your report will bring down your score for up to seven years. On the other hand, addressing these negative items, and working with creditors to satisfy these debts can result in the removal of such negative items and a higher credit score.

Manage Your Debt

Don't let your debts get out of hand. Consumer debt impacts credit scores, and fixing a damaged score involves managing debts and reducing your balances. Having a few debts will not hurt your credit score. However, if you continually max out your credit cards, exceed your credit limit or keep your credit card balances close to your credit limit, these actions will hurt your score. Creditors periodically update your credit report and list your balances on credit cards. The higher your balances, the lower your credit score.

Paying Creditors

Payment history is another big factor in credit scoring. In fact, of all the factors that influence your score, your payment history has the biggest influence---making up 35 percent of your score. Repairing your credit score starts with fixing the way you pay your bills. Late or skipped payments are extremely harmful. But you can repair damage by simply paying creditors on time.

Excessive Credit Inquiries

Inquiries refer to credit checks performed by creditors when you apply for a credit card or loan. Applying for several credit cards back-to-back results in numerous inquiries. Creditors see numerous inquiries as a sign of desperation, and each inquiry reduces your credit score. If attempting to fix an already damaged credit score, hold off from applying for new lines of credit.