7 Simple Ways You Can Quickly Repair Your Credit Score

Source: Flickr user B Rosen.

It's been more than five years since the Great Recession ended, but consumers could still have a long way to go before their credit scores are fully healed from the credit and housing meltdown.

Let's not forget that a dramatic jump in credit card delinquencies, compounded with an unemployment rate that hit 10%, stagnant wage growth, and more than one-quarter of homeowners being upside down on their homes during the height of the housing meltdown, led to a hostile lending environment from banks and wound up hurting the credit rating of a significant number of Americans, whether through debtor defaults or short-sales.

According to Experian, one of the three major reporting credit bureaus in the U.S., the average VantageScore as of Nov. 2013 throughout the country was 681 (the VantageScore, which was developed by the three major credit bureaus, mirrors the FICO score scale of 300 (worst) to 850 (best)). If this were a classroom, America would be averaging about a "C+" when it comes to their credit score.

Source: Flickr user Kathryn Decker.

Having a high credit score might seem unimportant, but a subpar credit score can disqualify you from being able to obtain a loan to purchase a home, or negotiate the best rates for other major purchases such as a car, or other big-ticket item. Not to mention that landlords and employers could base their decision to rent to you or hire you based on your credit history. A low score could indicate to landlords and employers that you lack the responsibility to handle your own affairs.

With that in mind, today we'll take a closer look at seven ways you can quickly repair your credit score. While these suggestions aren't going to get you to a score of 850 overnight, they're a stepping stone toward moving into the 700-plus score range, which is the key to netting preferential lending rates.

1. Be responsible
The first step probably goes without saying, but your ability to borrow money and pay it back is a direct reflection of your ability to take on responsibility. The easiest way to boost your credit score is to pay your bills on time.

For those of you like me who'd forget their head each morning if it wasn't attached, consider setting up an automatic debit or bill-pay service for your regular monthly bills. This way you can be sure your payments are never late and can instead focus on the other credit score-boosting actions on this list.

2. Stay within your limits
Just because you have credit doesn't mean you should use it. Credit score bureaus don't like seeing credit cards go years without use, but they equally dislike seeing credit cards maxed out, or very near their lending limit. In general, your goals should be to keep your credit card balance at no higher than 30% of your credit limit, and arguably it should be even lower than that.

If you find that your spending habits regularly put you over this 30% credit utilization level, but you're diligently keeping up with your payments on a monthly basis, it could be worth taking the one-time hit and requesting your credit card company to boost your credit limit. A higher limit could keep your credit utilization ratio down, which ultimately makes credit agencies very happy and can boost your credit score.

3. Keep old accounts open
Another key point is to keep older credit accounts open, especially if they highlight a positive payment history. While credit terms may change over the years, and/or a superior lending rate may come along that's offered by another credit card, your older credit accounts are packed with juicy payment history data that credit bureaus will use to determine your overall credit score.

Source: Flickr user NapInterrupted.

For example, if you close an old account you could potentially see your score drop simply because your credit history length (i.e., the average length of time your credit lines have been open) will fall. Your credit score tells a story, and the longer credit bureaus can trace that story back, even if your past was a bit checkered, the better your credit score will probably be.

4. Apply for a mix of accounts within a short time frame
In general, credit bureaus award the highest credit scores to those consumers that have a good mix of loan products (mortgages, car loans, personal loans, and credit cards) throughout their history. This doesn't mean you absolutely have to diversify your loan profile in order to land a good credit score, but it's never a bad idea as long as you know for sure you can afford it.

Source: Flickr user WoodleyWonderWorks.

More importantly, though, if you're going to apply for any sort of loans or credit it's in your best interests to do so within the span of a few weeks. As noted above, credit bureaus deduct points for each hard credit inquiry, so the tighter you can stack these inquiries together the less conspicuous it will look to credit agencies. Additionally, it will do the least amount of long-term score damage if you submit all of your loan applications within the span of a few weeks, rather than drag them out for months or years.

5. Apply for a secured credit card or gas card
If you've had difficulty securing a credit card in an attempt to rebuild your credit, applying for a secured credit card or a gas card could be a smart move.

A secured credit card requires an upfront deposit, but can be used like a traditional credit card. In many cases secured credit card issuers will report your positive credit history to credit bureaus, which can ultimately influence your score for the better.

Gas cards, on the other hand, are a lot easier to get approved than a standard bank-issued credit card because their purchasing scope is often a lot smaller (gas, food, and drinks mainly). Also, most gas card issuers don't anticipate you'll be running up $10,000 bills from gas purchases alone. Given that, gas cards represent an easy way to demonstrate to creditors that you can meet your monthly payment obligations.

6. Negotiate past debts when applicable
Consumers might view credit card companies as completely hidden behind an impenetrable wall, but your ability to negotiate past debts and late payments with them is actually much greater than you'd first believe.

Source: Flickr user David Goehring. 

If you're in arrears on a debt, it's in your best interests to get in touch with your creditor long before the debt goes into collections to work out a payment plan. This is beneficial for you as it keeps your account out of collections, which can be a long-term credit score killer, and it keeps your lender satisfied as they continue to receive a payment. In the end, your lender would rather wind up with anything other than zero.

If an account has gone into collections it's still worthwhile to contact your lender and attempt to negotiate the owed balance down from the original total. Explaining your situation, especially if you've been a valued customer in the past, may change your lenders tune, and it could even get the debt removed from collections with a note that it was "paid as agreed."

Late payments can also be a knock against your credit score. By a similar token, many lenders will often forgive a late payment once in a blue moon if you have a previous history of paying on time.

7. Stay on top of your credit score
Finally, it pays to stay on top of your credit history. AnnualCreditReport.com allows consumers a free peek at their credit history once a year from all three credit bureaus. Examine this report closely and look for any errors that may have popped up that could be hindering your credit score.

Believe it or not, errors on your credit report aren't as uncommon as you might think, and I can speak from experience that I've had to contact one of the three bureaus before to have them correct errant information found on my annual credit report.