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Expert Q&A: How to Rebuild Your Credit Score

August 11, 2011
Ask Erica
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QHi Erica,
I enrolled in a debt consolidation management program a couple of years ago because I maxed out on all of my credit cards and had trouble paying my bills — even just making the minimum payment was hard. I was horrible with making payments on time and my credit score was really bad. I haven’t checked in a while, but I’m guessing it’s better now? I don’t know when I should check. I am turning 35 this year and will have finally rid myself of all credit card debt by the end of this month. By the end of this year, I will have paid off my car loan, and I already paid off my school loans.

What are my next steps to help build my credit score? I do not have any credit cards and am living off cash and some savings. I want to get a credit card in case an emergency comes up, such as having my car break down. I am much more responsible now, and I know I will not go crazy with it, but I’m afraid I will get denied. If I should get a credit card, should I shop around for a low rate, or find one that can give me mileage or cash-back? I don’t know where to start and could use your advice. — Sky

ADear Sky,
I believe you’re in for a sweet birthday surprise! Instead of having to do a lot of heavy repair work, you’ve already accomplished most of what needs to be done. Want a sparkling credit score? I bet it’s beginning to glow right now.

By the time you enrolled in the credit counseling agency’s debt management plan, much had gone amiss. You overcharged and then struggled to meet your payments. These are the two weightiest factors in a FICO score because financial institutions and other businesses want to know how you’ve done in these areas before extending a line of credit or a loan to you. If your reports and scores indicate a long history of borrowing money and repaying on time and in full, they can feel fairly secure that you’ll do so again and will offer you prime products. But if the opposite shows up, their lending risk escalates and they’ll only offer those with high interest rates and expensive fees — if anything at all. Ask Erica

The reason you probably have a far better score now than you did a few years ago is that you’ve been working on those two scoring categories. You’ve made consistent, fixed payments on the plan and whittled down your credit card debt. Even better, you owe nothing on your student loans and are close to deleting that car loan — also boosting your credit rating.

Here are your easy next steps:

1. Pull copies of your credit reports. Log on to to get your free Experian, TransUnion and Equinox reports. Since you’ve been using a third-party plan, you’ll probably see that some of your creditors are making note of it. It’s not a credit scoring factor, but creditors may perceive participation as positive, neutral or negative. Remember, though, that on-time payments and low debt are most important. Which you have.

2. Check your FICO score. Go to to access your current scores. FICOs range from a low of 300 to a high of 850, but if yours are in the mid-700’s, you’re doing great. If they aren’t there yet, they soon will be.

3. Apply for the right credit card. Check out the types of credit cards that are available to you based on your scores and history. Identify one with no annual fee, a low interest rate and a rewards program. If you’re a traveler, go for an account with which you can accumulate points redeemable for flights. If you want cash-back on purchases, consider cards that offer them. Now, if you’re rejected, move on to the next best, but don’t overdo it — many inquiries in a short span of time can lower your score.

Charge regularly and responsibly. Once you have the account, charge a few times a month. By paying on time and in full, your credit will continue to improve, and you won’t wind up in expensive, stressful debt again.

As for that emergency credit card — while borrowing can help in a pinch, it’s far better to have a savings account that you can pull from if something unexpected arises. So if you haven’t already begun to sock cash away, start now.

Now, blow out those 35 candles with gusto!




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