Building a good credit score is a lot like building a good reputation: It takes years of work and consistency. "It's a tortoise and a hare kind of game," acknowledges Craig Watts, spokesman for FICO, which invented and popularized credit scores. "You score inches up at a tortoise's speed, and it drops at a hare's speed if you stumble."
That's disheartening news if you have a bad credit score -- but that doesn't mean you're out of options. While it's true that the best way to ratchet up your credit score is to pay off your bills and loans on time each month for years, there are a several ways you can nudge up your score, starting today.
If someone with high credit score (usually a family member) is willing to add you as an authorized user to one of their credit cards, you'll start reaping the benefits of their strong history.
FICO "is fine with the piggybacking notion for family members," says Watts. "Within that context, there are ample opportunities for education, shared experience and coaching on how to use credit."
But don't buy into a company's offer claiming that, for a hefty fee, it can boost your score by piggybacking on a stranger's account. A revised FICO scoring formula, due in 2009, will minimize the positive impact of piggybacking between strangers.
An oft-cited study by the U.S. Public Interest Research Group found that 79 percent of credit reports contained a mistake -- and a quarter were errors that could lead to the denial of credit. Head to www.annualcreditreport.com to check your report for free -- and send a letter to bureaus to clear up mistakes.
"If you get those errors cleaned up, it can make a big difference," says Chris Farrell, economics editor at public radio's "Marketplace Money."
Generally offered only at the time of a home purchase, rapid rescoring can help clean up errors fast, says Liz Weston, author of "Your Credit Score."
"If there's a known error on an account, and you can provide legitimate documentation showing it's an error, you can get a quick recalculation of your score to help with a lending decision," she says.
Judgments are made within 72 hours.
Because of its expense -- generally more than $100 for each disputed line -- it's usually valuable only to those who need changes quickly for a substantial loan. Though it's not an option offered directly to consumers, a broker can arrange for this service.
Late payments can demolish credit scores faster than you can say "Where's a stamp?"
If absentmindedness accounts for many of your late payments, it may be worth heading online to sign up for automatic payments.
"Automatic bill payments is a terrific way to make sure you don't accidentally miss a payment because it got lost in the mail, or it fell behind the desk, or it got ignored when you were on vacation," says Watts.
Your keys to getting into the 700-plus credit score club
Having a solid credit history with a credit score over 700 will open doors to money-saving opportunities -- from low-interest mortgages and loans to lower APR credit cards, better insurance rates and even jobs. Here are a slew of tips that can help get you and keep you in the get and keep a great credit score.
If the number on your credit score doesn't tell the whole story, consider attaching a note.
"You can attach a letter of up to 100 words that explains extenuating circumstances ," explains Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling.
"Instead of creditors looking at the information and wondering what happened, they'll know you lost job, got another one, and started paying on time again. That can bode well for you."
If you're someone who charges close to your credit limit each month -- even if you pay it off in full -- it could damage your score, says Weston.
"Your credit score is incredibly sensitive to how much you're charging compared to what your credit limits are," she says, for many cardholders. The solution is to pay off the bill in installments -- once before the statement closing date, and once after.
"It's kind of gaming the system a bit," Weston acknowledges. "But when I've been close to my limit like that, I've seen my score drop 40 points."
Your credit score is affected not only by your total debt-to-credit available ratio, but by that ratio for each individual card.
If you have cards that are closed to maxed out, pay off those first, says Weston.
"If you have cards that are way up there, it's depressing your score," she says. "You're risking having your other issuers raise their interest rates or having other credit problems."
If you're someone who's only had revolving credit, your score may get a boost simply from getting another type of loan -- a personal loan or a car loan, for example.
While you shouldn't rush out to get a loan simply to bring up your score, it's not always a bad thing to have a loan on your record.
"The lift your score may receive from a richer mix of credit on their credit report can, in some cases, outweigh the negative pull that comes from opening a new account," says Watts.
See related: FICO moves to limit impact of piggybacking between strangers, The good guys of credit repair: Rapid rescorers, How to attach a letter of up to 100 words to your credit report, 12 tips for setting up automatic bill payments