Using Credit Cards to Rebuild Credit and Improve Your Credit Score

Establishing good credit involves a lot more than just making your payments on time. You'd probably be surprised to learn how many factors go into calculating your credit score - that 3-digit number that, if at the lower end of the scale, can make your life singularly miserable.

Not All Credit Score Elements are Created Equal

Not every factor in this complex credit calculation carries the same weight. Credit bureaus assign various items lesser or greater importance. The most score-damaging listings to have on your credit report are negative items such as public records (e.g., bankruptcy and foreclosure), collection accounts, late payments, and charge-offs.

These bad credit listings are hard to shake, and unless you take steps to repair your credit, you'll be stuck with them - sometimes up to 10 years!

Your credit score will also take into account your credit "utilization ratio;" i.e., the amount of your available credit that you've already used up. Whether you have a high or low credit limit, if your credit cards are close to being maxed out month-to-month, this will have a negative impact on your credit score.

Credit bureaus will also look at how long your credit history is (longer is better), the type and amount of credit you have (having too many installment loans is frowned upon), and how many inquiries you have (too many too close together is not good).

Specific Steps to Improve Your Score

Now that you know all the best ways to hurt your score, let's take a look at the most effective strategies to improve it. First of all, avoid foreclosure and bankruptcy at all costs. Be sure to make your payments on time, and whatever you do, don't miss so many that your creditor turns your account over to a collection agency. Be on your best credit behavior, and your score will slowly creep up.

Part of this strategy involves obtaining an unsecured credit card or line of credit and reestablishing your creditworthiness through responsible habits.

Don't max out your card!

Make your payments on time, and slowly rebuild creditors' confidence. This tool should not be underestimated when it comes to improving your track record and getting back into good favor with creditors. This is a good place to start, but it can be a slow and frustrating process while in the meantime you're sidelined in the credit world.

That's why erasing negative items from your credit report can be an invaluable part of any good strategy for credit repair. Despite what the credit bureaus say, you CAN take action to delete questionable items on your credit report that are holding you back.

You may be able to see your credit score improve in a few weeks or months as opposed to a few years. In 2008 alone, the legal experts at Lexington Law were successful in removing over 665,000 negative items from their clients' credit reports. With their help, you can be an active participant in shaping your credit's future.

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