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How to Improve Your Credit Score -- Ilustrated

This section illustrates just how quickly your credit score can increase if you pay your bills on time as agreed and pay off debt, pay down debt, or don't accumulate anymore debt.  Below is a real person's credit scores and information from her credit reports.  In just one year, "Jane Doe" went from having very bad credit to having "good" to "excellent" credit.  As long as she keeps paying down debt and paying her bills as agreed, she will have a credit score of 750 or higher, which should be everyone's goal.

"Jane Doe's" Credit Scores Over a One-Year Period


Equifax  620672690720
TransUnion    545680720742

How did Jane Doe do it?  It was much easier than you think.  She simply started (1) paying down her debt without accumulating any more debt; (2) negotiating settlements to pay off credit card accounts that had been charged off; and (3) paying all current, open accounts as agreed for one year.  For example, below is a glimpse of Jane Doe's Experian Credit Report:

Account / Amount OwedNegative Notation How Jane Resolved the Problem

First USA Bank $4,952More than 120 days late;Settled with collection agency for $1200
Charged off

MBNA America $1,479More than 120 days late Settled with MBNA for $350

Citibank $7,679   Collection account Settled for $1,500 with collection

Chase $4,890     More than 120 days late;Settled for $1,800 with collection
  Charged offagency

Bank of America $867Paid off card    Reducing debt improves credit score
  Always paid as agreed

Capital One $1,027    Paid off card    Reducing debt improves credit score
  Always paid as agreed

Student Loan $42,743Making extra payments    Making an effort to pay off debt as
                                              Always paid as agreed             quickly as possible

You can do the same thing Jane Doe did and you shouldn't get discouraged if you don't have the money to pay off debt as quickly as Jane did. 


(1)  Just paying the minimum monthly payment on your credit card as agreed and on time for six months will increase your credit score by 20 to 60 points.  If you don't have an open credit card account that is in good standing, consider opening one, using the card regularly and paying the balance in full when the bill arrives so that you can start to improve your credit score.

(2)  Settling debts for less than the amount owed can positively and negatively impact your credit score.  On one hand, not paying the full amount owed is negative and decreases your credit score.  On the other hand, settling this debt once and for all lowers the total amount of debt owed.  From the illustration above, one can see that Jane resolved got rid of quite a bit of outstanding debt over this one year period.

(3)  If Jane continues using the Capital One and Bank of America credit cards without being late or missing payments, over time this will improve her credit score significantly.

(4)  Jane should make a concerted effort to pay down her student loans as quickly as possible.  Although she can write off the student loan interest on her taxes and she was given 20 years to pay off her student loans, it would be better if she paid down this debt as fast as she can.

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