Lets say your mom, dad, husband or wife have a credit account in his or her own name that has long history, low balance, and is paid as agreed.  Let us also say that they are willing to add you as an authorized user.  It is as simple as the card holder calling the credit company and requesting a card in your name.  All of the score enhancements attached to that account will then be added to your score.  It may take anywhere from a few days to a few weeks for that account to report to the three repositories, but when it happens, your score will be boosted.

Go out and get another credit account.  If you have a low score, you may believe you cannot get another account.  This is generally true for credit cards but there are other accounts that you can get.  Secured credit cards are like prepaid cell phones.  You pay several hundred dollars into a secured account at a credit union or bank and receive a credit card in return.  When you use the account, it is reported to the credit repositories as a credit card.  Keep in mind that you don’t want to charge much as it is better to keep your balance very low. FICO scores are enhanced by low balance on available credit.

If you are maxed out on your credit cards, your score suffers tremendously.  By paying them down to less than 30% of your authorized maximum, your score will be greatly improved in a short period of time, typically within a month.   Another option is asking your credit company to increase your credit limit to hit that 30% ratio.  The more accounts you have paid to under 30% of the credit limit the better your score.

Collection accounts are debts that creditors have usually given up on but continue to be reported on your credit.  Meaning, the damage has been done.  You know you owe the money on these debts and want to come clean, but do not do it right away.  Old accounts have already had their impact on your score and the older they are the less affect they have.  If you pay the account off, the creditor is happy, but you have added recent activity to a “derogatory account” and your score will suffer, rather than improve. 

After your score improvement is attained, and you have bought whatever you need on credit, then go ahead and pay off collections.  In most cases, you can make settlement offers that will be accepted at a fraction of the debt balance.  Just keep in mind that in the short run your credit score will suffer and then after a period will gradually improve.  Changes in the scoring models have accounted for the full pay off old accounts so that recent activity may not affect score.  However, if it is reported as a settled account your score could be negatively affected.  Old collections drop off of your credit report after seven years.

You need to have some history to get a score at all.  Presumably, you will have some “trade lines”, such as consumer or revolving debt.  A car loan would be an example of consumer debt. Revolving debt is a debt that has no set limits on it like a department store credit card.  Most mortgage lenders require that you have at least one of this type of trade line for government loans and four for conventional loans.  

“Alternative credit” is monthly obligations which are not formalized by a note, such as: utility bills, cell phone bills, health club membership, insurance payments and so on.  Government lenders will require credit history on these types of obligations to be added to the credit report as additional “trade lines”.  Usually you will need at least three of these.

What about late payments?  “Payment as agreed” means that you have not been more than 29 days past due on your bills.  It has nothing to do with late charges on your account.  None of us wants to incur late payment charges at all; however, they do not affect your score until you are 30 days late.

Pay your bills on time, keep your balances low, and keep your credit lines for a long time and your scores will continue to improve to the point that you will enjoy the lowest interest rates and best terms from banks, credit card companies, and mortgage lenders.