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19 Ways to Restore Your Credit Score

Chase Rubin

CreditUpdates.com wants you to know that the health of your credit score is of the utmost importance. Although many are likely aware of this simple fact, very few understand the specific strategies that can be used for maintaining and improving a credit score. This is incredibly useful information and is certainly valuable no matter where you happen to fall on the credit score spectrum.  

Developing an understanding of the strategies that follow will also help you make better sense regarding the methodology used to calculate your credit score, which in turn makes it far easier to manage your score in the future. What follows are 19 simple and straightforward financial strategies, all of which are specifically designed to help you maintain or restore your credit score in the most efficient and effective way possible. 

  1. Review Your Current Credit Score

It should be plainly evident that collecting as much information as possible regarding your credit score is a necessary first step toward improving your score. Everyone is entitled to a free credit report three times per year, which ensures that you have access to all of the information you will need to lay the groundwork for strengthening your credit score. Each of the strategies that follow requires that you have access to your credit report and the information contained within the report is simply invaluable across a number of circumstances.  

  1. Address Any Errors Immediately

You might be surprised to discover errors on your credit report, which is why it is so absolutely necessary to review your report on a regular basis. Fortunately, it is possible to correct any errors you find, and it is certainly important that you do so as quickly as possible. You can ensure that your credit score is corrected and reflects your accurate credit score by contacting any one of the major credit bureaus to dispute the erroneous information. 

  1. Closely Monitor Credit Report for Any Changes

Since it is unfortunately common that incorrect information will wind up having an adverse effect on your credit report, credit monitoring is an incredibly valuable service. Through the use of 24/7 monitoring services, you can guarantee that you are always aware of any changes to your credit report as soon as they occur. If the update contains inaccurate information or reveals a potential act of fraud, you can act swiftly to prevent having to endure negative consequences that arise through no fault of your own.  

  1. Set Up Auto-Payment for Monthly Bills 

If you are among the many whose credit score has been adversely affected by a poor history of on-time payments, then you can restore your credit score by establishing a greater degree of consistency in making these payments in full and on time. Using an auto-pay system connected to your checking account is a simple strategy for ensuring that you never miss a payment, but you can also set up monthly reminders as well.  

  1. Focus on Reducing Your Debt

The amount of debt you owe — along with the amount of available credit to which you currently have access — is a major factor in determining your credit score. Reducing your outstanding debt is one of the best strategies for improving your credit score, as debts that are paid off in their entirety reflect very well on you and your ability to responsibly manage your debt. Paid-off debts also demonstrate a low-risk level, which results in creditors being more likely to approve future lending requests.  

  1. Take Care of Any Overdue Payments

Allowing any payment to be so long overdue that it goes out to collections will have a significant and adverse impact on your credit score, which will, in turn, make it more difficult for you to secure a line of credit at a reasonable interest rate in the future. When you review your credit report, make sure to take care of any overdue payments as quickly as possible. Collections accounts will remain on your report for seven years, so take action as soon as you are able.  

  1. Negotiate a Repayment Agreement With Creditors

If you have overdue payments that might soon be sent out to a collection agency, it is always best to pay it off in order to avoid the negative impact on your credit score. Of course, this is far easier said than done, but there are options available to you even when you are unable to pay off the debt in full.  

In these circumstances, contact the creditor and express your desire to pay off the debt as quickly as possible, but explain that you are simply unable to pay off the full amount at the present moment. You can then attempt to negotiate a repayment agreement with the creditor, and in most cases, a compromise can be achieved that suits you and the creditor.  

  1. Maintain Low Balance on All Credit Cards

Although it is essential to have credit available if you wish to restore your credit score, it is best if you pay off the entirety of the balance each month or at least keep the balance well below 30 percent of the total credit available. Maintaining a credit card balance that is near the upper limit of your available credit signals financial risk, which will always result in a lower credit score. If you already have several cards close to the limit, commit to paying off a substantial portion of the balance each month until you have it well below 30 percent of your total available credit. This will have an immediate positive impact on your credit score. 

  1. Resist Temptation to Move Debt Around or Close Credit Accounts

There are quite a few factors that go into calculating your credit score, including your general behavior concerning the opening and closing of credit accounts as well as transferring debt without paying down the total balance. These actions are considered in relation to all of the other factors used to determine your credit score, so you have to be careful when closing accounts or moving debt around since it is not easy to manipulate your score through these methods. Instead, steel your focus on paying off your outstanding debts in a manner that suits your budget.  

  1. Average Account Age Matters

Among the many short-term strategies available for improving your credit score, one of the most common is the practice of opening new credit card accounts in order to create a more favorable debt-to-credit ratio. Although debt-to-credit ratios certainly matter a great deal, it is important to remember that the average age of your credit accounts also factors into your credit score. Before you open a new account, consider how the new account will influence the average age of all your other credit cards. You might discover that the benefit of adding available credit is entirely negated by the reduced average age of your credit cards.  

  1. Exercise Caution When Rate Shopping for a Loan

It is certainly a responsible practice to shop for the best available rate when searching for a loan, especially when the loan is for a sizable and important purchase. Your credit report considers the likelihood of rate shopping and does not penalize you for doing so, as long as you do so within a relatively short period of time. Repeatedly rate shopping over the course of several months will appear as though you are searching for lines of credit for different purposes, which represents a risk that creditors typically wish to avoid.  

  1. Open a New Credit Account

Your credit score is influenced by the number of active credit card accounts along with the average age of those accounts, so it is important to have active credit cards and to make a commitment to using them responsibly. If you do not have an active credit card or have just a single account open with a low balance, it might make sense to open a new credit card account as long as you are confident in your ability to maintain a low balance while making payments on time.  

A new account will step up your credit-to-debt ratio, but it will also lower the average age of your active accounts. Using the new card and maintaining a low balance will ensure that your credit score rises as a result.  

  1. Manage Your Credit and Demonstrate Consistent Restraint

Your credit score is essentially a metric designed to reflect the level of risk associated with lending, so you have to engage in financial practices that indicate the lowest level of risk possible. A consistent history of on-time payments and general restraint with regard to spending will reflect on you in a positive fashion, leading to improvements in your overall credit score. Limiting the amount of debt you owe to creditors and making timely payments will go a long way toward ensuring that lenders perceive you as a low-risk lending option.  

  1. Remain Wary of Fraud and Take Preventive Measures

Although being victimized by fraud will not necessarily cause long-term harm to your credit, it can be frustrating and difficult to correct any inaccurate information appearing on your credit report due to fraud. This can wreak short-term havoc on your credit score, which may temporarily reduce your ability to secure funding for necessary expenses.  

Even though there are processes in place for disputing inaccurate information — particularly when those inaccuracies stem from fraudulent behavior — it is always best to take preventive measures to ensure the avoidance of these adverse consequences. In addition to credit monitoring services, you should also strongly consider fraud prevention and resolution services as well in order to ensure ongoing protection against fraudulent behavior. 

  1. Seek Assistance From a Credit Counselor

There are limitless circumstances in which it may become necessary to seek out the assistance of a credit counselor in order to develop a sound approach to managing your finances. Your credit score will not be harmed as a result of seeking financial guidance, and the help of a professional may prove to be extraordinarily helpful in addressing any number of specific financial issues you may be dealing with.  

  1. Allow Old Debt to Remain on Your Credit Report

The presence of debt on your credit report can be a very good thing for your credit score, yet many consumers mistakenly believe that removing paid-off debts from their report will restore their overall score. The fact is that lenders and creditors want to work with consumers that have a history of paying off outstanding debts, so allowing old, paid-off debt to appear on your report demonstrates your past history of financial responsibility. Paying off your student loans or your mortgage is precisely the kind of information that a lender wants to see, which is why old debts that have been paid in full will restore your credit score.  

  1. Avoid Financial Habits Commonly Associated With Risk

As you know, your credit score is a measure of risk associated with lending, so it only makes sense that your credit score will rise and fall as a result of increasing or decreasing evidence of risk. Your credit score could fall if you suddenly engage in financial habits associated with risk, including a missed payment or a sudden decrease in the amount you pay toward an outstanding balance on a credit card or loan. 

Conversely, you can demonstrate reduced risk — and therefore restore your credit score — by paying more than usual or even making multiple payments per month. Of course, you should only pay more than usual if it is within your budgetary means to do so. If you intend to make multiple monthly payments on credit card debt, then you should do so once before the end of the statement period and again before the balance due date.  

  1. Create and Adhere to a Reasonable Monthly Budget

Most consumers saddled with low credit scores fail to properly budget each month, which creates unnecessary stress and makes it difficult to restore their credit score over time. A simple spreadsheet documenting your expected expenses and your expected income each month will make it easier to manage your debt and develop a plan for reducing any currently outstanding debt.  

  1. Only Request Additional Credit When Absolutely Necessary

While requesting additional credit will positively influence your debt-to-credit ratio, you should only request additional lines of credit when it is absolutely necessary. Requesting new lines of credit or extending existing lines of credit may indicate risk and could actually lower your score. Use your credit responsibly and request additional credit only when absolutely necessary.