If you're ready to improve your bad credit, there's no reason to focus on tactics that won't bring big results. Adding a point to your credit score won't help you qualify for the mortgage loan, but adding 100 most certainly will. Follow this road to credit repair for the best long-term results.
- Payment history. As much as 35 percent of your credit score is based on your ability to pay all of your debt on time. "You'll see the biggest boost if you don't make any late payments," says Clarky Davis, who writes the Debt Diva blog for CareOne Credit in Columbia, Md. "Paying consistently is a huge demonstration of responsibility and that will help increase your score."
- Rebalance your credit utilization ratio. Another 30 percent of your credit score is based on the amount of credit you use compared to the overall credit you have. There are two pieces to this equation for credit repair. Not only should your overall credit utilization across all credit cards and other lines of credit be 30 percent or less, but each individual credit card should be less than 30 percent of its maximum, says Liz Pulliam Weston, author of "Your Credit Score."
In other words, it's better for your credit to have two cards with $300 balances and $1,000 limits rather than one credit card with a $600 balance and one with a zero balance.
- Improve your credit history over the long haul. The longer you've been managing credit wisely, the more confidence it gives lenders. Time will make the biggest impact on credit repair. Leave open your oldest credit card account because closing it will end up shortening your credit history.
Copyright 2010, Bankrate Inc.