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How to Repair Credit Score

In today's economy it's more crucial than ever to have a good credit score, but millions of consumers simply don't and all too often find themselves looking for tips on how to repair their credit score.

How to repair my credit score if I already have a credit record? If you already have credit accounts (credit card(s) and/or loans), you will have a credit file and score with the credit bureaus. The following tips will help:

Use credit, but be smart about it. One vital tip on how to repair your credit score - you need to use credit to build credit. Make manageable purchases with your credit card and pay down the balance each month, but don't pay off your balance completely. A $0 balance is good to avoid interest charges but not to build your credit score. If a $0 balance is reported to the bureaus it appears as though you're not using the account regularly, which negatively impacts your score. To improve your credit score, pay off all but $5-$10 of your balance. This demonstrates responsible and controlled use of credit. And never max out your card, even if you are able to pay off the full amount at the end of the billing cycle. Keep your balance below 30% of the available limit. Be meticulous in this area as more than a third of your credit score is based on your credit utilization ratio (how much of your available credit you're using).

Spread out your debt. It's better to have small balances on several cards than a big balance on one card - another fundamental tip on how to repair your credit score. It's also good to have wide gaps between your balances and your limits, especially on revolving debt (credit cards). Although you'll still be rewarded for paying down installment debt (mortgages or auto loans) your scores improve much more dramatically when you pay down revolving debt. A few useful pointers on how to repair your credit score.

Keep accounts open and active. Another vital tip on how to repair your credit score is do not close any accounts. Each of your accounts has a history, and your credit history represents 35% of your score. Another related tip on how to repair your credit score is don't let your creditor close it due to inactivity (a 'closed by grantor' listing lowers your credit score).

Have a healthy mix of credit. Another important tip on how to repair your credit score is to have at least one installment and two revolving accounts; after that be careful about applying for new credit. Too much available credit can be perceived as dangerous by potential lenders. You'll also get dinged with inquiries; every point counts when you are applying for a major loan.