Improving your credit score is a lot like sticking to a diet – it takes time and discipline and you will only see results after sticking with it for a significant amount of time. Unfortunately, there are no quick fixes when it comes to credit since so much of the scoring is based on patterns defined over time. Since the collapse of the housing market due to sub-prime mortgages and the banking crisis in America, it is much more difficult to obtain credit in general, nevermind if you’ve had credit problems. Correcting issues on your credit report can be time consuming, but with some work you can clear it up and become a low risk borrower once again.
Collections and delinquent payments can negatively affect your credit score significantly. Paying your bills on time, even if you only pay the minimum amounts, is a major factor in increasing your overall credit score. The longer you meet your payments on time, the more your score will improve. Use your credit cards sparingly, but not too sparingly. Even if you pay your bills in full every month, racking up big balances hurts your credit score. On the other hand having a zero balance is not desirable either. Try to remain at no more than 30% of your limit at all times.
Be aware that any collections on your account remain there for seven years, regardless of whether or not you pay them off. After seven years they can no longer negatively affect your credit score, but up until the seven year mark they are there for your potential creditors to see regardless of whether or not you have paid the debt.
Contact a legitimate credit counselor. You need to be careful since there are lots of scam artists looking to take advantage of those who are desperate to improve their credit or to get out of debt. Also look to pay debt off rather than simply moving it around. While many people think they should pay down the debt with the highest interest rate, it’s actually a smarter move to pay the debt that is closest to its limits since one of the factors considered in your score is your debt to available credit ratio.
Do not look to open several new accounts all at once. This will bring your average account age number down and negatively affect your score, particularly if you have only been managing credit for a short while. Any flurry of activity like this will hurt your overall credit score.
Having credit cards is OK, as are installment loans (i.e. furniture, appliance, etc.) and it’s considered a lower risk than someone with no credit cards provided that you are timely with your payments and manage them responsibly.Resist the urge to consolidate your credit card debt onto a lower interest card. It’s better to have a small balance on several different cards, than one big balance.