Ask Money

Getting back to our old (good) credit score

Chris Farrell May 23, 2012

Question: My husband and I gave our daughter $40,000 for a down payment on a condo. She defaulted on the loan and went into foreclosure. Consequently, our credit score has tanked. How can we get our old great credit back? Nobody cares that we were not the ones who defaulted. Please help. Cathy, Redmond, OR

Answer: I’m so sorry that happened to you. That’s tough. Unfortunately, there’s no way to restore your credit score quickly. Fortunately, good habits and time will improve your credit score. I’m not sure of all the details with your loan gone bad, but I have a couple of basic steps to recommend.

I would get your credit report from the major credit reporting bureaus and look them over for any errors. You can’t eliminate anything that’s true. But sometimes mistakes creep in and you want to get rid of them. By federal law, you can get a copy of your credit report for free from each of the three main credit report bureaus once a year. The only one authorized provider of the service is AnnualCreditReport.com 

An easy way to bolster your credit score is to show regular activity on your credit cards. I would use your credit card to buy small stuff on a frequent basis. You want to keep your balances low, pay the bill on time and pay it off in full. (Contrary to popular belief, you don’t have to carry a balance to improve your credit score.) From a credit scoring perspective, with time, your good financial habits will increasingly dominate the calculation while the big ding on your credit history fades in significance. It disappears after 7 years.

Last — or maybe it’s first — I would get a copy of Your Credit Score: How to Improve the 3-Digit Number That Shapes Your Financial Future (4th Edition), by Liz Pulliam Weston. She goes into much greater detail on how to get your old credit score back. It’s in paperback and it’s a worthwhile investment.

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