Editor's Note: Do you have a question about your finances? Crosswalk.com welcomes financial columnist, Deborah Nayrocker. Deborah will be answering selected readers' questions in her monthly column. To submit your question, email us at: moneyquestions@crosswalk.com.

Dear Deborah,

Q: My husband and I have car loans and no credit cards. What can we do to rebuild our credit? - Teresa

A: Rebuilding your credit is a worthy goal. One of the best ways to do this is to pay all of your bills on time. Some consumers think it doesn't matter if they are late on a payment, as long as the bill or debt is eventually paid off. However, a late payment affects more than a third of your credit score. This one component is the most important factor of your FICO credit score, comprising of 35% of the total.

Being late for just one payment will hurt your score up to a year, and making very late payments can affect it for up to three years. Collections and bankruptcy information can weaken the score for up to seven years.

Did you know that unpaid parking tickets or library fines can affect your score? Craig Watts of credit scorer Fair Isaac says that many cash-strapped local governments have turned to collection agencies for help. Watts reports that debts such as unpaid library fines and parking tickets that go to collection agencies can easily drop credit scores by 100 points. Any debts going to collection agencies affect the payment history score.

Factors included in your FICO score:

  • 35% Payment history: Have you paid your bills on time? If not, how late were you, and how often?
  • 30% Amounts owed: How much do you owe on each account, and how much of your credit limit have you used?
  • 15% Credit history: How long have you had each account?
  • 10%: Types of credit: What kinds of debt do you have?
  • 10% New credit: How many new accounts or queries have you had?

Source: MyFico.com

Posted October 12, 2009. Submit your financial questions to: moneyquestions@crosswalk.com.

Deborah Nayrocker is the author of The Art of Debt-Free Living - Living Large on Less than You Earn and Living a Balanced Financial Life. Her Web site is http://www.artofdebt-freeliving.com/.