I Used These Tricks to Repair My Credit After Destroying My FICO score

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Good credit is like being able to breathe clean air. It may be something you really don’t think about until it’s gone.

Like moving to a new city where smog and pollution are a constant hazard, bad credit suffocates you and keeps you from enjoying your financial life.

I had stellar credit in my 20s, building my FICO score to over 750 points. My credit score helped me get cheap loans to buy six rental properties and funded a lifestyle that was beyond my means.

By the time the housing bubble burst, I had already started selling a few of my properties — but I wasn’t quick enough. One house sat vacant on the market, then another and another. The loss of rental income was too much to cover and I started falling behind on payments.

I was eventually able to sell the properties, but the damage was done. My credit score had plunged more than 100 points, and for the first time in my life, I was being denied on credit applications.

I knew that if I ever wanted to use credit again, my credit score needed to recover. I had no idea how long it might take.

How Long Does it Take to Repair Your Credit?

Most people know how easy it is to destroy their credit score. It’s as simple as being a month late on your mortgage or overextending yourself on credit cards.

What is not as well known is just how long it takes to rebuild your credit. Since your payment history accounts for the 35% of your FICO score, those missed payments and defaulted loans weigh on your financial record for a long time.

In fact, FICO estimates it can take up to three years to fully rebuild your credit score after being just 30 days late on your mortgage. If you declare bankruptcy, it could take up to 10 years to rebuild your credit.

3 Credit Tricks That Helped Me Boost My FICO Score Fast

Author Joseph Hogue poses with his wife and son.

Photo courtesy of Joseph Hogue

I couldn’t wait years to rebuild my credit score. I knew I wanted to invest in real estate again once the market rebounded, but I wouldn’t be able to afford the high-interest-rate loans banks were offering me.

I had heard that the fastest way to increase your credit score was to check your credit report for errors and have them removed. It happens more often than you might think, but I wasn’t so lucky. Everything on my credit reports from the three bureaus was there for a reason.

Repairing my credit would take more work, so I read every blog I could find and made a list of steps I could take to increase my score.

1. Reduce Revolving Debt

I took out a peer-to-peer loan to pay off my revolving credit card debt. The type of debt you owe accounts for 10% of your score. Revolving debt (loans that don’t have a fixed payment or payoff date) are harder on your score because it’s easier to get in over your head. Using a consolidation loan shifts your debt to a non-revolving loan.

2. Check Your Credit-Utilization Ratio

Your credit-utilization ratio, the amount you owe versus your total credit limit, is an important factor in your credit score. Owing $5,000 on a credit card with a $5,000 limit looks like you are maxed out and could be struggling for cash. Owing that same $5k on a card with a $10,000 limit looks like you are managing your spending more effectively.

The consolidation loan helped to improve my credit-utilization ratio by paying off existing credit card debts, but I also called two of my credit card issuers to get the limits increased. This can be a dangerous trick if you can’t control your spending, but it can show that other lenders trust you enough to extend you credit.

3. You Can Always Negotiate

I had fallen behind on my car payments and the lender reported the missed payment on my credit report. It took a few calls and letters to find someone at the lender who would work with me, but I was able to get the missed payment removed from my credit report in exchange for paying off the loan early with some of the money from the consolidation loan.

Getting bad marks removed from your report isn’t easy, but most creditors just want their money and will work with you if you negotiate.

These quick tricks increased my credit score in just a couple months. I started to see my credit score grow by the third month. It still took two years to fully rebuild my credit score, but the progress I made in those first few months helped clear the air around my FICO score, and loan approvals started rolling in once again.

I didn’t appreciate my good credit until I no longer had it. Even if you don’t plan on using debt, don’t take your credit score for granted. It’s so much harder to rebuild your FICO score than it is to maintain it but these three credit score tricks can help recover your good financial name in a flash.

Joseph Hogue is an investment analyst and blogger with five websites across the personal finance niche. He holds the Chartered Financial Analyst (CFA) designation and appeared on Bloomberg and CNBC.