How to Repair Your Credit Score

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Repairing Your Credit Score

Here's how to revive your credit score over time.


I had a tough year and was late paying some bills. How do I repair my credit score?

Getting current on any overdue bills is crucial. Payment history is the largest component of the FICO score and VantageScore, two measures that lenders commonly use to judge whether to grant credit to potential borrowers. And how late the payment is matters: A 60-day delinquency, for example, can be more damaging to your score than a 30-day delinquency, says Ethan Dornhelm, senior director of scores and analytics for FICO.

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The balance that you owe relative to your limit on revolving debt (such as credit cards), which FICO calls the credit utilization ratio, is another important factor in your credit score. Aim to keep your balance on each card at no more than 30% of the limit. "The lower the utilization, the better your score," says Dornhelm. And be judicious about opening new credit lines. Applying for several credit cards in a short period results in "hard" inquiries on your credit report, which can shave points from your score.

With time, your score will rise as long as you practice good habits. But bouncing back after a default or bankruptcy can take years. The newest versions of the FICO score and VantageScore exclude from their formulas collection accounts that have been paid off, but lenders are often slow to change to the latest scoring models.

See Also: 10 Reasons You Will Never Get Out of Debt