If your credit history has been damaged by late payments or too many inquiries, time is your biggest ally. Over time, the effect of these negative events lessens. In addition, there are steps you can take:
#1 Pay your Bills On Time. Late payments and collections can seriously damage your credit and simply paying them off won’t remove the event from the record. Paying on time is important because it avoids further damage to your credit report and over time can start to build a better credit record.
- Delinquent payments can stay on your credit report for seven years, however, their impact declines over time (older late payments have less of an impact than recent late payments).
- Most public records stay on your report for seven years, although some bankruptcies may stay on your report for 10 years and unpaid tax liens remain for 10 years.
#2 Keep your credit utilization ratio (your balance divided by your credit limit) below 30% on each credit card account. Check your balances periodically during the month and pay off purchases to keep your credit utilization rate low.
#3 Pay Down Debt rather than moving it around. High outstanding debt will lower your credit score. The exception would be a balance transfer that lowers your interest rate, allows you to pay off debt sooner, and keeps your credit utilization ratio low.
#4 Leave Unused Credit Accounts Open: In addition to considering your credit utilization ratio on each card, lenders consider your overall credit utilization ratio across all your accounts. Keeping unused accounts open keeps the amount of credit you’re using low, which in turn yields a lower overall credit utilization ratio.
#5 Apply for Any New Credit Wisely. Unnecessary inquiries can create too many hard inquiries on your credit report. Apply only for loans and cards that you will benefit your overall credit mix and that you have a credit score good enough to get approval for.
- Hard inquiries remain on your report for two years.
#6 Monitor your Credit Report regularly. Report any fraudulent activity or inaccurate information immediately.
#7 Consider a Credit Repair Service. If your credit has been severely damaged by delinquent payments or bankruptcies, consider using a credit repair service to help guide you through the steps to building better credit.
As your credit score rises, you can apply for credit cards that better suit your spending habits.
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