Reduce the amount of debt you owe, This is easier said than done, but reducing the amount that you owe is going to be a far more satisfying achievement than improving your credit score. The first thing you need to do is stop using your credit cards. Use your credit report to make a list of all of your accounts and then go online or check recent statements to determine how much you owe on each account and what interest rate they are charging you. Come up with a payment plan that puts most of your available budget for debt payments towards the highest interest cards first, while maintaining minimum payments on your other accounts.
Some creditors report to all three bureaus, while some may only report to one. The information on your credit report is then filtered through a scoring model to create your credit score. There are different scoring models used for credit scores, but the most popular one used by lenders and credit card companies is the FICO score.
New credit tips: Re-establish your credit history if you have had problems: opening new accounts responsibly and paying them off on time will raise your credit score in the long term.
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Collections are complicated because paying them off may actually end up hurting your credit score by resetting the start date from when it was reported. Before taking action on collections, read on to find out how to navigate these murky waters. Like charge-offs, collection accounts may be reported for up to seven years from the date you first fell behind with the original creditor.
Pay Down “Maxed Out” Cards First – If you use multiple credit cards and the amount owed on one or more is close to the credit limit, pay that one off first to bring down your credit utilization rate. Diversify Your Accounts – Your credit mix – mortgage, auto loans, student loans and credit cards – counts for 10% of your credit score. Adding another element to the current mix helps your score, as long as you make on-time payments.
