What Are the Best and Fastest Ways to Rebuild Your Credit?

Filing bankruptcy or being turned down for financing because of a low credit score can seem like the end of your financial world, but there is hope. Credit repair is possible; and while improvements don't usually happen in one day, starting anew and learning how to manage credit can fix a bad credit score in a relatively short period. This opens the door to numerous financing opportunities -- mortgage loans, auto loans and low-rate credit cards.

Payments and Credit

Payments directly influence credit scores. As a matter of fact, payments are the biggest factor impacting personal credit scores. Thirty-five percent of your personal score is based on how well you manage payments to your creditors. Missing a payment or making a payment late can decrease your score, especially if this becomes a habit. Lenders report delinquencies, and with this information on credit reports, it becomes increasingly difficult to acquire installment loans or mortgage loans. Timely payments may call for organizing your bills on a calendar, avoiding procrastination and mailing payments early, or paying online to avoid delays with postal mail. Many creditors also allow customers to set up automated monthly minimum payments to avoid inadvertently missing due dates.

Importance of Lowering Debt

Lowering debt is another key way to quickly repair a bad credit score. MSN Money underscores the importance of a low debt-to-income ratio, and the importance of keeping credit card balances below 30 percent of your credit limit. Higher account balances can drastically reduce your personal score; but paying off these accounts can quickly add points to your score. Use personal savings to completely wipe out credit card debt, or eliminate debt slowly by making higher minimum payments and stopping credit card use.

Adding New Accounts

Credit scores can plateau, and increasing your score or rebuilding your credit may require opening a new credit account to start fresh. Starting fresh is key after filing bankruptcy, especially if all your debts were wiped out in the proceeding. Secured credit cards offered by banks, which require a security deposit paid to the financial institution, are simple to get after a bankruptcy. And as long as the bank reports to the bureaus regularly, a good payment record will help rebuild your credit.

Credit Report

Another fast technique for rebuilding your credit score involves notifying creditors and lenders of any credit report mistakes. Mistakes on credit reports can harshly affect credit scoring, especially if mistakes include serious derogatory remarks like judgments, liens and collection accounts. Updating your report and deleting these errors can help you regain credit score points.