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Whatever happened to ruin your credit, whether it was a major event such as a bankruptcy or foreclosure or just a history of poor debt management, it will take time to rebuild it. With patience and discipline, you can improve your credit report and your score by following these tips.
Continue to use credit
After mismanaging your credit, it can be tempting to just quit cold turkey, but it is very hard to rebuild your credit history without using a credit card or taking out a loan. The easiest and least risky way to build your credit score back up is to use a credit card responsibly. If you have to, get a secured card, which requires you to put down a deposit that becomes the credit limit. Use the card only for things you would normally buy each month, such as gas and groceries, and then pay off the balance each month.
Pay all your bills on time
In addition to using a credit card and paying the bill on time each month, you need to make sure you pay all your other bills in full and on time each month, including your rent and utility payments, car payment and any other recurring payments. Late payments will put a black mark on your credit report and lower your credit score, so paying late when you are trying to rebuild your credit score will make it nearly impossible.
Minimize debt
If you have debt that wasn't wiped out with a bankruptcy, you need to concentrate on reducing it and eliminating it if possible. A big component in figuring your credit score is how much debt you have relative to how much available credit you have. It's important to keep that ratio below 30 percent -- even lower is better.
Open accounts sparingly and don't close accounts
While it's good to have more than one credit account, you don't want to have too many. And if you are trying to rebuild your score after it has crashed, opening new accounts is not a good idea. On the other hand, though you may be tempted to cancel credit accounts once you pay them off, doing so will reduce your credit limit, which could make your debt ratio to high. You also can eliminate positive credit history if the account has been in good standing.
Improving your credit score is largely about discipline. If you use credit cards sparingly, limit debt and make your payments in full and on time, you will build good credit and raise your credit score.