Taking Steps to Repair or to Build Your Credit Score

Presented by: Marek Petynka

One’s credit score is probably the second most important number they have (next to their Social Security Number).  Credit scores advise stores of how they should feel about you and whether or not you should be trusted with loaned money and at what interest rate you should be expected to repay it. 

Many of us don’t even think about our credit scores until we have decided to purchase a house.  Our credit scores are one of the chief determining factors in making a home loan.  A person with a very bad credit history may not even qualify for the tiniest of home loans!

There are some things we can do to make sure our credit history improves.  These simple steps can add up to make a big difference:

Get a small loan

This may seem counterintuitive, but it is one of the better ways to improve a credit score.  By taking out a small loan and making timely regular payments to pay it off, you are building a successful borrowing history, which is looked upon kindly by those who score your credit.  A small debt, repaid on time, will help your credit score.

Acquire and use a store credit card

Store cards provide another means by which you can develop a quality borrowing history.  Usually the debt involved with store card purchases is secured by a remaining interest in the items purchased.  Because of this and the relatively low amount of total credit available, one can qualify for these cards fairly easily.  Make a purchase with the card and pay it off on time and successfully. 

Finance a purchase with a large down payment

By buying an item with a large down payment and subsequent smaller payments, one can work at developing a positive borrowing history.  Sellers are prone to be receptive to negotiating loans of this sort, as they already have the bulk of their money up front due to the down payment size and often retain a security interest in the item purchased.  This tactic is often used with late model used cars.  Again, the goal is to develop a track record of successfully handled loans where all payments were made on time.

Pay your bills on time

One of the most overlooked ways to improve a credit score is simply to make all of your bill payments on time.  Late pays are recorded as part of your credit history and can have an adverse impact on your score.  By making payments on time, your score will improve.

Using strategies like these can have a significant impact on your credit score.  When coupled with other smart maneuvers like requesting a copy of your score and making sure any necessary corrections are made, quick improvements can be noticed. 

Credit scores exist to guide lenders in determining whether or not you are a good risk.  If your history shows several loans, all of which were repaid in a timely manner and a history of on-time payments for other bills, credit scoring agencies will be willing to classify you as a good risk.  You will have demonstrated an ability to borrow and then to properly repay your debts.

Almost all major purchases require financing, and almost all financing decisions, in large measure, boil down to whether or not your circumstances and credit score meet a lender’s expectations.  A low score can leave a person hamstrung when attempting to secure financing for the purchase of a home or new auto.  This makes building a good credit history essential for personal financial success.

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