One mishap can destroy your credit rating and stop you from getting a mortgage, credit card or auto loan. But there are ways to quickly repair your credit and achieve an A-plus credit rating. With any credit repair strategy, patience and effort are key to success. You can't add 200 points to your credit score in days or weeks, but you can reverse a bad rating in as little as six months to one year.
Don't Ignore Reporting Errors
One mistake on your credit report can decrease your personal rating, and some lenders won't approve you for a loan. But you can avoid this hassle by checking your report once or twice a year and disputing errors—regardless of how minor they may seem. Order reports directly from the credit bureaus, or request an online report from annualcreditreport.com. Everyone's entitled to one free report a year.
Pay Your Bills
Along with correcting major and minor reporting errors, it's imperative that you pay your creditors on time—every month. Missing payments or sending late payments can quickly reduce your FICO score, and it isn't always easy to recoup these points. Maintain a high score by signing up for automatic bill pay or mailing payments at least seven days before their due date.
Get Out of Debt
Maxing out your credit cards and carrying high credit card balances are detrimental to your credit score. To repair your credit, stop using it for purchases and pay down your balances. Use personal savings to eliminate debt, or take advantage of your home's equity and use this money to reduce high balances.
Apply for a Secured Credit Card
You need credit to have a high credit score. If you're looking to repair bad credit, you'll need to open a line of credit and maintain it. Since credit card companies and other lenders are less likely to approve your application, contact banks and inquire about secured credit cards. Pay your security deposit and begin using the card. Use the card for emergencies and pay off the balance every month.
Stop Applying for New Credit
Credit inquiries also reduce your score, so if you want to repair bad credit stop applying for new lines of credit. Inquiries appear on your report, and they remain for up to two years. In addition, each inquiry knocks points off your score. There's nothing wrong with seeking credit for an auto loan or mortgage. However, excessive inquiries are enough to severely damage your credit and impede credit repair efforts.