9 Tips to Improve and Rebuild Credit Scores
by Lisa Phillips
February 15, 2010
by Lisa Phillips
February 15, 2010
The current "credit crunch" has resulted in
lending institutions reducing the availability of
credit, especially for those with problem credit.
Now is the time to deal with any problem credit
and rebuild your credit scores. The following are
tips to improve and raise your credit scores.
lending institutions reducing the availability of
credit, especially for those with problem credit.
Now is the time to deal with any problem credit
and rebuild your credit scores. The following are
tips to improve and raise your credit scores.
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Thousands of dollars can be saved by having good to excellent credit scores. A good credit
score by today's standards would be 700 and above. A credit score of 740 is what to aim for if
you want the absolute best interest rates and terms.
score by today's standards would be 700 and above. A credit score of 740 is what to aim for if
you want the absolute best interest rates and terms.
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1. Authorized buyer credit
Family members with great credit can help you improve and boost your credit scores with
authorized buyer credit. A credit card company or lender can allow an account holder to add you
as an authorized user on the established account. The account holder’s information, including
payment history, account balance and credit limit becomes a part of your credit history.
Authorized user accounts can instantly improve your credit scores and offer those rebuilding
credit scores an established account to add to their credit history. See Authorized Buyer Credit.
2. Add positive credit lines
An integral part of improving credit scores involves showing creditworthiness. Apply for easy to
get credit cards. There are many companies that do not require strict credit guidelines. These
companies extend credit to consumers with little to no credit history and less than perfect credit.
See Add Positive Credit.
Family members with great credit can help you improve and boost your credit scores with
authorized buyer credit. A credit card company or lender can allow an account holder to add you
as an authorized user on the established account. The account holder’s information, including
payment history, account balance and credit limit becomes a part of your credit history.
Authorized user accounts can instantly improve your credit scores and offer those rebuilding
credit scores an established account to add to their credit history. See Authorized Buyer Credit.
2. Add positive credit lines
An integral part of improving credit scores involves showing creditworthiness. Apply for easy to
get credit cards. There are many companies that do not require strict credit guidelines. These
companies extend credit to consumers with little to no credit history and less than perfect credit.
See Add Positive Credit.
3. Are your credit limits being reported
Make sure your credit card companies report your limit and balance. Some may only report
your balance and not your credit limit. Lenders who engage in this practice may actually be
causing your credit scores to be lower. The scoring system will plug in your highest balance as
your credit limit and if you are currently at a high balance this can be detrimental to your
scores. Capital One use to be notorious for this practice until they changed their policy in
August 2007.
4. Decrease credit card balances
Amount of debt owed is 30% of your credit score which is significant when you are attempting
to improve and rebuild your credit scores. Keep your credit balances within 30% or less of your
total credit limit. Let’s say you have a credit card with a $5,000 limit and your balance is close
to that $5,000 limit. Your credit scores are going to suffer because you have a high balance to
limit ratio. Decreasing your balance to 30% or less of your credit limit will increase your credit
scores immediately. The great thing about this technique is that it works whether it is a $5000
limit credit card or a $500 limit credit card. Decreasing your account balances to 30% or less of
your credit limit on accounts will instantly improve your credit scores.
5. Retain old credit
Older credit is vital to credit scores, even if the account is inactive. A credit score contains five
major elements: payment history (35%); amount of debt owed (30%); length of credit history
(15%); mix of credit (10%) and new credit (10%). Maintaining older credit is vital to improving
credit scores as credit history constitutes 15% of your overall credit score. Do not close older
accounts, they show stability.
6. Limit the number of hard inquiries
Hard credit inquiries can take up to five (5) points off your credit score. Although getting new
credit can help improve and rebuild your credit scores, applying for new credit will lower your
credit score. Limit the number of inquiries you have in a 12 month period. Spreading your hard
inquiries among the three major credit bureaus can keep your credit reports from taking a hit.
Before applying for new credit call the lender or credit card company and ask which credit
bureau they use. Most do not mind revealing that information. Rebuilding your credit involves
adding positive credit to your files; however, once you are approved for a few new credit
accounts stop seeking new credit.
Additionally, any company that pulls your credit report without your authorization is in violation
of the Fair Credit Reporting Act which allows only authorized inquiries to appear on your credit
report. According to FCRA rules you are entitled to $1,000 for each unauthorized hard inquiry.
See Erasing Inquiries
7. Get a secured credit card
Secured credit is a good option for those who cannot qualify for regular credit. Not only will you
have the benefits of a regular credit card but you may also get an opportunity down the line to
convert that secured credit card into a regular one. Apply for Secured Credit Cards.
8. Pay your obligations by the due date
A late or missed payment can drop a good credit score by as much as 80 points or more. It
may not make sense but if you already have negative entries on your credit report adding
more will not hurt you as much as if you don’t have any negative entries. Regardless, paying
on time can raise your credit score as payment history constitutes 35% of your credit score.
9. Request a Deletion for settled negative debts
If you pay a collection or settle a debt make sure you obtain a deletion and not a “paid
collection” entry. This also applies to paying a debt directly to the creditor. Paid collection
entries do not raise your score. See Get Deletions.
Make sure your credit card companies report your limit and balance. Some may only report
your balance and not your credit limit. Lenders who engage in this practice may actually be
causing your credit scores to be lower. The scoring system will plug in your highest balance as
your credit limit and if you are currently at a high balance this can be detrimental to your
scores. Capital One use to be notorious for this practice until they changed their policy in
August 2007.
4. Decrease credit card balances
Amount of debt owed is 30% of your credit score which is significant when you are attempting
to improve and rebuild your credit scores. Keep your credit balances within 30% or less of your
total credit limit. Let’s say you have a credit card with a $5,000 limit and your balance is close
to that $5,000 limit. Your credit scores are going to suffer because you have a high balance to
limit ratio. Decreasing your balance to 30% or less of your credit limit will increase your credit
scores immediately. The great thing about this technique is that it works whether it is a $5000
limit credit card or a $500 limit credit card. Decreasing your account balances to 30% or less of
your credit limit on accounts will instantly improve your credit scores.
5. Retain old credit
Older credit is vital to credit scores, even if the account is inactive. A credit score contains five
major elements: payment history (35%); amount of debt owed (30%); length of credit history
(15%); mix of credit (10%) and new credit (10%). Maintaining older credit is vital to improving
credit scores as credit history constitutes 15% of your overall credit score. Do not close older
accounts, they show stability.
6. Limit the number of hard inquiries
Hard credit inquiries can take up to five (5) points off your credit score. Although getting new
credit can help improve and rebuild your credit scores, applying for new credit will lower your
credit score. Limit the number of inquiries you have in a 12 month period. Spreading your hard
inquiries among the three major credit bureaus can keep your credit reports from taking a hit.
Before applying for new credit call the lender or credit card company and ask which credit
bureau they use. Most do not mind revealing that information. Rebuilding your credit involves
adding positive credit to your files; however, once you are approved for a few new credit
accounts stop seeking new credit.
Additionally, any company that pulls your credit report without your authorization is in violation
of the Fair Credit Reporting Act which allows only authorized inquiries to appear on your credit
report. According to FCRA rules you are entitled to $1,000 for each unauthorized hard inquiry.
See Erasing Inquiries
7. Get a secured credit card
Secured credit is a good option for those who cannot qualify for regular credit. Not only will you
have the benefits of a regular credit card but you may also get an opportunity down the line to
convert that secured credit card into a regular one. Apply for Secured Credit Cards.
8. Pay your obligations by the due date
A late or missed payment can drop a good credit score by as much as 80 points or more. It
may not make sense but if you already have negative entries on your credit report adding
more will not hurt you as much as if you don’t have any negative entries. Regardless, paying
on time can raise your credit score as payment history constitutes 35% of your credit score.
9. Request a Deletion for settled negative debts
If you pay a collection or settle a debt make sure you obtain a deletion and not a “paid
collection” entry. This also applies to paying a debt directly to the creditor. Paid collection
entries do not raise your score. See Get Deletions.
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