“I’m Sorry, But There Is No Magic Bullet…”

While that may not be what you want to hear, it is the truth. There simply is no magic bullet to rebuilding your credit score overnight. There are however, some things that you can do to make an impact on improving your credit score within a reasonably short period of time.

The first step to rebuilding your credit history, is finding out what your credit score is so that you know what you’re starting with. One way to get your score is to use a credit monitoring free trial that provides you with a free credit score as a part of trying out their service for free. A good place to get your score for free is at this link. While trying their service, you can also dispute items on your credit report.

Many items on credit reports are erroneously listed or are old accounts listed by companies that are either no longer in business, or who have sold the debt to a collection agency. These are easy to get removed from your credit report and can provide a good boost to your score, depending on the type of account that is removed.

Many people are under the impression that if they can just get their credit score improved, that they’ll be able to immediately get credit, such as a car loan. While it is very important that you raise your credit score to be able to qualify for the best interest rates available, auto financing is still available for people that have bad credit.

Also, your debt to income ratio can play a vital role as well, when pursuing credit…

You may have a beacon score of 720, but if you have just as much money going out each month for bills as you have income, you’re not in a good position to obtain credit. Having a reasonable debt to income ratio (the amount you owe each month vs how much income you have) can be very beneficial when pursuing credit, such as an auto loan.

Here are 7 tips for improving your credit score…

1) Pay your bills on time. As simple as it sounds, it’s the number one factor in calculating your score.

2) If you have missed payments in the past, bring those accounts current or work with a credit counseling agency that can bring your accounts current for you, so you don’t have to pay late fees and can start fresh.

3) Paying off a small debt that is showing a bad credit history can make a big difference. Some small accounts, especially small collection accounts can be settled for much less than the original amount owed. By using the contact information listed for the account (which should be on your credit report), you can contact these companies by phone or email and offer them a small settlement amount. They can only say no and you may be surprised how easy it is to get a yes. Having that small account removed or showing as being paid can give your score a good boost depending on the type of account.

4) Pay off your credit cards monthly. Having an available credit showing a zero balance can work wonders.

5) Don’t move credit card balances from one account to another. While you can save money by transferring your balance to a lower interest rate credit card, it’s better to have that longer term account open and showing as being in good standing.

6) If obtaining an auto loan with bad credit, make sure that the company that will be funding your loan reports to the major credit bureaus. Buy here pay here car lots do not help to improve your credit score.

7) Dispute errors or old accounts that are lingering on your report. You may be surprised at how easy it is to do online and how quickly some of those bad accounts can be removed just by asking.

Additionally, you can also add a statement to your credit report. This won’t help to boost your score per se, but will help in showing potential creditors that you are proactive in taking responsibility for your credit, which may help when applying for a mortgage, credit card or home loan.

Secured Credit Cards

While secured credit cards are forbidden to be advertised as a method of rebuilding your credit score, having an open line of credit reflected on your report that shows “paid as agreed” is definitely a good thing. Secured credit cards report to the credit bureaus just like all credit accounts, and can provide an additional positive account reference for future creditors to take notice of. Also, many secured card providers may offer you an unsecured credit line in the future, once your responsible account history has been established with that company.

One Last Note

Just because you’re approved for line of credit or a car loan, doesn’t mean that you have to use all that you are allowed. Maxing out available credit limits is an easy trap to fall into and has caused some of the problems that the American economy faces today. By being conservative with your purchases on credit, you’ll enjoy having lower monthly payments and as those payments are easier to make on time, you’ll be back on the road to having a good credit history in the future.

Note: This information is not intended to provide financial advice. You should seek the advice of a financial counselor before making any financial decision.