Question: I know this question has been asked a million times before and here is it once more – how do I improve my credit history?

I got out of grad school with huge loans and was able to pay only for a brief while before my bank balance drained out. I missed my payments for 6 months straights.

I got a job this year and payed off all my loans at a shot. I didnt know it will nose dive my credit history score to 551. So how do I get back up and running, I am unable to get a car loan dispite having regular income for last 8 months + no loans with credit cards.

Please throw some light.

Answer: The delinquent loan adversely affected your rating more than paying off the loans.

Now that you have paid off your debt, start over by getting a credit card from your local bank or credit union — start with a “secured” card if there is no other way. Pay it off every month.

Then take out a small personal loan and pay it off on time or early.

The only way to build a credit rating is to establish credit and use it wisely. Well, you basically know the answer to your first question — keep up a history of paying off your loans on time, and your score improves. Credit agencies have long memories — it’s going to take more than 8 months of keeping your nose clean to make ‘em think you’re a decent credit risk.

OTOH, some places are better than other at looking past your credit history. Do you belong to a credit union, or do you qualify? Credit Unions, as a rule, tend to treat their members a bit better than the big banks (not always, but usually).

Also, if you were able to pay off all your school loans in one pop (hell, it took me a good part of a decade), then you probably should be able to save up for a decent pair of wheels in a short time. By then, you should be able to quality for some sort of auto loan (albeit at a ridiculous rate of interest). Get it, then pay it off relatively quickly with your savings.

Also, it never hurts to give your credit reports a once-over to make sure the problems are all your fault — once a year you can use https://www.annualcreditreport.com to check all your credit histories for free. I recently had a bogus entry on my Experian report that dropped my Experian score nearly 100 points — took a bit of time to clear it up, but it was worth the hassle.

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