A credit score, also known as a credit rating, is a numerical score used by credit card companies and lenders to assess the likelihood that a person will pay back a loan. Generally, a failure to pay back a loan within the agreed-upon time frame will lower one’s credit score, raising the amount of interest the borrower will have to pay on future loans. Fortunately, for those holding low scores, there are a number of ways of building up one’s rating.
Look for Errors
The quickest way to rebuild your credit score is to make sure that the information used to compile it is correct. After receiving your score, examine the items in the attached report. If there are any incorrect items, contact the credit-rating agency and explain the error.
Pay Your Bills
The surest way of building a credit score is to pay your credit card bills and make payments on your loans on time. The more consistently you make your payments, the higher your score will rise.
Get Current on Payments
If you fall behind in a payment, your credit score will usually be lowered. To build your score back up, get current on your bills as quickly as possible and stay that way.
Keep Your Debt Low
According to credit-rating agency Experian, high levels of outstanding debt can lower your score. To build your score, keep your debts low.
Don't Close Unused Accounts
According to BankRate.com, it's a mistake to close unused accounts before lowering your total debt. Instead of raising your rating, this can shift your debt ratio higher and actually lower your score.
Don't Open New Accounts
According to Experian, you should also not try to open new accounts to try to lower your debt ratio and raise your available credit, as this could backfire and sink your rating.
According to BankRate.com, you can improve your rating by shifting your debt between accounts. Credit-rating agencies consider it better to have a number of cards with a small amount of debt on each than one card that is almost maxed out.
Beware of Credit-Repair Scams
According to the Board of Governors of the U.S. Federal Reserve system, there are a number of scams that purport to be able to quickly repair your credit. These are almost uniformly misleading or fraudulent and should be avoided.
According to the Fair Isaac Corporation, the inventors of the modern credit score, building a credit rating takes time. The only sure way of raising a credit score is to continue to pay bills on time and then wait for it to slowly rise as credit-rating agencies become more confident in your ability to repay loans.
Michael Wolfe has been writing and editing since 2005, with a background including both business and creative writing. He has worked as a reporter for a community newspaper in New York City and a federal policy newsletter in Washington, D.C. Wolfe holds a B.A. in art history and is a resident of Brooklyn, N.Y.