Although poor credit can negatively impact many different aspects of your life, credit problems need not cause you to feel frustrated and helpless. While bad credit means that you will have fewer options, there are positive steps that you can take to rebuild your credit score. In fact, you can start to see results much sooner than you might think. It is possible to improve your credit rating within 60 days by using the right strategies.
Step 1
Request a free copy of your credit report from the major credit reporting agencies (see Resources below). Review the report and identify any inaccurate information that was reported. Disputing errors on your credit report is one of the fastest ways to give your credit score a boost. Some of the credit reporting bureaus now allow you to correct certain mistakes to your credit report online.
Step 2
Submit any documentation to the credit reporting agency proving that an account listed in negative standing is actually paid to date. You should also submit proof that an account listed as still being past due or unpaid has since been paid. When it comes to credit problems for which you might have a legitimate reason for not paying, you can request that a note explaining the reason be attached to your credit report. One such example would be a case of identity theft.
Step 3
Ask a family member who has a high credit score and a well-established credit history to add you onto one of her credit card accounts as an authorized cardholder. You do not necessarily need to have access to using the account. However, that person's healthy payment history now becomes part of your credit history and could help to raise your score. In many cases, a parent is willing to do this for an adult child.
Step 4
Bring any past due accounts up-to-date. Paying your bills on time is an obvious quick fix yet one many people tend to ignore. If you have the means to pay all or any credit accounts that are past due, you need to do so immediately. This step can help to improve your credit fast. Personal finance columnist Liz Pulliam Weston points out that making a late payment can drop a previously good credit score by as many as 100 points.
Step 5
Contact the creditors for accounts in bad standing in an effort to negotiate a payoff agreement. Ask the creditor to report your account as being paid in full upon fulfilling the payoff agreement. Request to receive the payoff arrangement in writing from the creditor before making any payments.
Step 6
Pay down on one or more of your credit cards that are at or near the credit limit. A sound financial practice is not to use more than 30 percent of your total credit line. Using no more than 10 percent of the credit available to you is even better when you are trying to increase your credit score. Whenever you have extra money, now is the time to start reducing the debt on some of your accounts. Your credit score will improve as you lower your debt.
Step 7
Postpone applying for new loans or credit cards until you build a better credit report. According to Experian, one of the three major credit-reporting bureaus, multiple credit inquiries on your credit report within a short period of time may lead some lenders to believe that you have poor credit. While inquiries alone are not normally taken as indicators that you are unlikely to pay future bills, in combination with a high debt ratio and previous late payment history, too may inquires could affect your credit score.
Tips and Warnings
- Open a credit card account to make small purchases during the month. Pay the entire balance in full before the due date each month to establish your ability to make regular payments. As silly as it may sound, paying off your credit card bills entirely does not necessarily show that you are able to manage debt. Having a zero balance is not the best way to raise a credit score. You want to show creditors that you can consistently handle paying your debts.
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