To rebuild your credit score, you must add positive information to your credit report. Knowing the exact type of information to add will ensure you’re taking the right steps toward complete credit repair.
New Credit Accounts
If you can’t get all the negative information erased from your credit report (and sometimes it’s better if you can’t), you need to overshadow it with positive information. The more credit accounts you can add to your credit report the better. But, be careful not to apply for too many credit cards or loans in a short period of time. Lenders will start getting suspicious about the number of applications you are making and will start turning you down.
On Time Payments
Payment history has the biggest impact on your credit score. Delinquent payments are likely what caused your credit score to drop, but unfortunately, the same number of positive payments won’t restore your credit score. Instead, it will take dozens of months of timely credit card and loan payments to bring your score up. But, in time, your score will recover as long as you continue to pay on time and never miss a payment again.
When you get new credit cards, it’s not time to go on a spending spree. Instead, you should only charge a small part of your credit limit – like 30% or less. On a credit card with a $1,000 credit limit, keep your balance below $300. Another large part of your credit score (30%) compares your credit card balances to your credit limit. Using too much credit hurts your credit score.
Some people charge a large balance and pay it off before the grace period thinking that will save them from the damage. That won’t necessarily save you from the damage of a high credit card balance because you don’t know when the credit card issuer will report your balance to the credit bureau. If your balance is reported while your credit card balance is high, your score is still affected even though you pay off your balance.
Get Different Types of Credit
Credit cards are just one way you can improve your credit score. Another part of the credit score calculation considers the types of credit you have experience with. If you don’t have any installment loans on your credit report, getting new ones will help you. But, make sure you take out loans only as needed and not just to improve your credit score. Only borrow a loan that you can afford to repay to protect your credit score.
Many credit repair resources recommend you borrow a passbook loan, place the loan in a savings account, and then use what you’ve borrowed to repay the loan. Before you pursue this option, make sure the lender actually reports these loans to the credit bureaus because many of them don’t. If the loan payments aren’t reported, they won’t help your credit score.
The key to successful credit repair is adding more and more new positive information to your credit report. Over time, you’ll see your credit score improve. Maybe you’ll need a free credit score estimator.