Repairing Your Own Credit Score - 5 Simple Steps

Your credit score history affects more than your ability to borrow money. Today, credit score histories are being used more and more as a point of reference for sizing up a person's character and reliability. Besides potential landlords, insurance companies are using credit report scores to determine your risk assessment, and increasingly, employers are reviewing credit report scores before making hiring and promotion decisions. The reality is your credit score and your personal life are inextricably intertwined, and if your credit score scale is out of whack, unfortunately the assumption is that the rest of your life is not being managed very well either.

Here are 5 Simple Steps to Repair Your Own Credit Score and keep it high:

1: Check Your Credit Report Score

If people are using your credit scores as your personal report card, it's important to know what it says. Check your credit score scale from the big three agencies at least once a year so you can stay on top of any serious errors. Check for accounts that aren't yours, payments showing as late although you paid them on time, bogus collection accounts, and accounts not showing as "included in bankruptcy" although they were. Dispute errors and make sure eligible black marks that are older than seven years are removed.

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2: Always, Always Pay Your Bills on Time.

35 percent of your FICO score is affected by your payment history. Setting up automatic payments and e-mail reminders will help you prevent missing any payments. Even missing one payment on one credit card can undo months of on-time diligence and lower your credit score significantly. Don't let financial disputes or unpaid bills turn into collections. Also be sure to pay close attention to medical bills, since medical providers are increasingly willing to turn these over to collectors when insurers are slow on payment.

3: Keep Your Debt Low

It is highly recommended that you don't use more than 30% of your available credit and the less credit you use, the better. Your Debt-to-Credit ratio is 30 percent of your FICO credit score, so reducing the ratio of your debt to your available credit will help you gain some points. What seems like an easy step to repairing your own credit score can be fraught with temptations because most people tend to live beyond their means. If you are truly motivated to improve your credit score, you must dedicate yourself to lowering your credit card debt.

4: Keep Your Old Accounts Active

The longer you've responsibly used credit, the better it is for your credit score. The length of your credit history is 15 percent of your credit score scale. Closing old accounts doesn't help improve your credit scores and may actually hurt them. Plus credit card issuers increasingly are canceling cards that haven't been used in a while, so if you want to keep an account active, use it occasionally and then pay the balance in full. Shoot for 10 years of good credit on your smaller accounts to get the best rating.

5: Pay Before the Statement Date, and Twice is Even Better

Most consumers don't know that even if you pay your balances in full every month, your card issuer may still report a balance on your account. How can this be? Because typically, the balance as of your last statement date is the balance that will be reported to the credit bureaus, according to Barry Paperno, a consumer operations manager with Fair Isaac, the company that created the FICO score. If you pay most of the bill before the statement date, you can lower your utilization rate. Another way to lower the balance on your statement date is to make multiple payments throughout the month. This way, you'll cut the amount of credit you're using at any one time and have the benefit of remitting smaller, more manageable payments rather than one larger lump sum. This can be a very effective step to repairing your own credit score and getting back on the path of financial health.