Credit Restoration Tips

Credit restoration means restoring your credit records to a positive state after having financial problems that cause payment delinquencies, defaulted balances and perhaps even a court judgment, wage garnishment or repossession. You can even restore good credit after filing bankruptcy. The My FICO credit score website explains that you can fix credit most efficiently by focusing on the things that have the biggest influence on your credit rating.

Payment History

Your payment history makes up a hefty 35 percent of your credit score, according to the My FICO site, which means on-time payments go a long way toward restoring a damaged credit file. Catch up any late accounts as quickly as possible. Set up electronic payments that go out automatically if your financial institution allows it, which prevents lateness because of mail delays. The late payments stay on your credit reports for seven years, but their impact goes down when your most recent history is all good.

Balances

The amounts you owe on credit cards, loans and other accounts hurts your credit if the debt loan is high or you are at or close to the credit limits. My FICO advises that your balances influence 30 percent of your credit score. Pay them down by funneling extra money to the accounts with the highest interest rates, the Motley Fool financial website recommends. This strategy has the most impact because the interest chews up much of each payment. The extra funds help pay down the actual balance, and your credit is restored as the owed amount falls.

Time Frame

Old accounts look better on your credit reports than newer ones, according to the My FICO site. Your history of credit use makes up 15 percent of your score. Make a special effort to maintain your oldest credit card accounts in good standing once you catch them up. Keep them open even if you pay them off. Consumer advocate Clark Howard's website advises buying something small every few months on your old accounts and paying it off quickly. This tip restores your credit by generating current positive activity.

Account Types

Credit restoration requires balancing your accounts between installment loans, like automotive financing, and revolving accounts like Visa and MasterCard credit cards. Your credit score goes down if you fill out too many applications, the My FICO site warns, but you may need to get new accounts if your old ones were closed involuntarily by the lenders because of your credit problems. Start out with a secured credit card, which requires you to guarantee repayment with a deposit, or open a gasoline or retail store account, MSN Money writer Liz Pulliam Weston advises. Restore a good history for a year or two, then expand to a regular credit card.