There is nothing wrong with trying to repair your credit yourself but in order to do so it is best to understand how your FICO score is determined. A FICO score is what most lenders most commonly use to determine a persons credit worthiness which they will then in return use to determine what rate the loan will be granted at.
There are five components that make up a persons FICO score. Thirty percent of your FICO score is determined by the amount that you owe in other debts. In order to raise your score it would be beneficial to start paying down debts owed, while keeping up with making current or due payments. Another major factor in your FICO score is your payment history, which determines approximately 35% of your credit score.
People get under the assumption that once they start paying off their debt and they get to the point where a credit card is completely paid off that they should cancel the card but canceling a credit card can actually hurt your FICO score because length of credit history determines 15% of your credit score. You’d be better served to pay off the balance of any credit cards first and then keep the account open. But just because the account is open doesn’t mean you have to carry those cards around with you. Invest in a $20 lock box and store your cards in there along with any other important documents.
The last 20% of determining factors of a FICO credit score are the sum of 10% from credit in use and then 10% of new credit. Although you may be trying to get out of debt, it doesn’t hurt to put a little on a credit card here and there as long as you have the money to pay it off when the bill arrives. With new credit, the credit does not necessarily have to be a credit card, but can also be any other form of financing such as any of the 0% APR deals super stores offer on major purchases like furniture or appliances.
When repairing your credit on your own taking the five components discussed above and working them into your budget in a way that works with your finances can improve your strategy for increasing your FICO credit score.
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Posted by Sara 
October 2007