Answer Quickly: Paying your bills on time, paying off debt, avoiding new hard inquiries, and getting assistance establishing credit are all ways to raise your credit score.
Recognize the basic factors that affect credit, such as whether you carry a balance on your credit card and whether you pay your bills on time, in order to improve your credit score. Checking for errors on your credit report is also an important step.
Your credit score is a three-digit figure that is determined by the data in your credit report and typically ranges from 300 to 850. Its valuable for lenders, who need to understand how likely you are to repay money you borrow.
Although there are a number of credit scoring models with various score ranges, a credit score of 700 or above is typically regarded as good, and a score of 800 or above is exceptional. If your score isnt quite in that range, heres how to get it back in shape.
Are you struggling with a bad credit score? Don’t worry you’re not alone. Millions of people are in the same boat, and the good news is that there are steps you can take to improve your credit score and get back on track.
We’ll get into the specifics of credit repair in this guide, covering everything from knowing your credit score to doable tactics for raising it. In order to prevent you from falling for con artists, we’ll also address frequent myths and misconceptions regarding credit repair.
So grab a seat, and let’s learn how to permanently raise your credit score!
Understanding Your Credit Score
Your credit score is a three-digit number, typically between 300 and 850, that reflects your creditworthiness It’s like a report card for your financial behavior, and lenders use it to assess your risk as a borrower
FICO® and VantageScore are the two primary credit scoring models utilized in the United States. Although they employ distinct algorithms, both models take comparable elements into account when determining your score:
- Payment history (35%): This is the most important factor, accounting for 35% of your FICO® Score. It shows whether you pay your bills on time, including credit card bills, loans, and utilities.
- Amounts owed (30%): This refers to the amount of credit you’re currently using compared to your total available credit. It’s expressed as your credit utilization ratio, and experts recommend keeping it below 30%.
- Length of credit history (15%): This measures how long you’ve been using credit. The longer your credit history, the better.
- Credit mix (10%): This refers to the variety of credit accounts you have, such as credit cards, loans, and mortgages. Having a mix of credit can help improve your score.
- New credit (10%): This includes recent credit inquiries and new accounts you’ve opened. Too many inquiries or new accounts in a short period can negatively impact your score.
It’s critical to frequently monitor your credit score in order to assess your development and pinpoint areas in need of improvement. You can get your credit score for free from various sources, including:
- Credit card companies: Many credit card companies offer free access to your credit score through their online portals.
- Credit monitoring services: Services like Credit Karma and Experian offer free credit monitoring, which includes your credit score and report.
- Annual credit reports: You’re entitled to one free credit report from each of the three major credit bureaus (Experian, TransUnion, and Equifax) every year. You can request your reports at AnnualCreditReport.com.
Fixing Your Credit Score: Actionable Strategies
Now that you understand the basics of credit scores, let’s dive into the strategies you can use to improve yours.
1. Check Your Credit Report for Errors
Verify that there are no mistakes on your credit report before beginning any modifications. Mistakes happen, and sometimes inaccurate information can negatively impact your score.
Here are some common credit report errors to look for:
- Incorrect personal information: This could include your name, address, Social Security number, or date of birth.
- Accounts that don’t belong to you: This could be due to identity theft or someone else’s information being mixed with yours.
- Closed accounts that are still reported as open: This can negatively impact your credit utilization ratio.
- Negative information that should have been removed: This could include late payments that are older than seven years or accounts that have been paid in full.
You can dispute any inaccuracies with the credit bureaus if you discover any on your credit report. You can do this online, by mail, or by phone. Within 30 days, the credit bureaus must look into your dispute and fix any mistakes.
2. Pay Your Bills on Time
This is the single most important thing you can do to improve your credit score. Late payments can stay on your credit report for up to seven years, and they can have a significant negative impact on your score.
Set up automatic payments for your bills to ensure you never miss a payment. You can also use budgeting apps or spreadsheets to track your spending and make sure you have enough money to pay your bills on time.
3. Keep Your Credit Utilization Ratio Low
Your credit utilization ratio is the amount of credit you’re using compared to your total available credit. It’s expressed as a percentage, and experts recommend keeping it below 30%.
For example, if you have a credit card with a $1,000 limit and you’re using $300 of credit, your credit utilization ratio is 30%.
To lower your credit utilization ratio, you can:
- Pay down your credit card balances.
- Ask for a credit limit increase.
- Open a new credit card with a higher limit.
It’s important to note that opening a new credit card can temporarily lower your credit score, so only do this if you’re confident you can manage the additional credit responsibly.
4. Pay Down Debt
Having a lot of debt can also negatively impact your credit score. The amount of debt you have is factored into your credit utilization ratio, and it can also indicate to lenders that you’re a higher risk.
Focus on paying down your debt, starting with the accounts that have the highest interest rates. You can use the debt snowball method, which involves paying off the smallest debts first, or the debt avalanche method, which involves paying off the debts with the highest interest rates first.
5. Keep Old Credit Cards Open
The length of your credit history is an important factor in your credit score. The longer your credit history, the better.
So, even if you’re not using a particular credit card anymore, it’s a good idea to keep it open. This will help to lengthen your credit history and improve your score.
However, if you’re paying an annual fee for a credit card you’re not using, it might make sense to close it. Just be aware that closing a credit card can shorten your credit history and lower your score.
6. Don’t Take Out Credit Unless You Need It
Every time you apply for credit, a hard inquiry is placed on your credit report. Hard inquiries can stay on your credit report for up to two years, and they can lower your credit score.
So, only apply for credit when you need it, such as when you’re buying a house or car. Avoid applying for multiple credit cards or loans at the same time, as this can have a negative impact on your score.
7. Consider Credit Repair Services
If you’re struggling to improve your credit score on your own, you might consider using a credit repair service. These services can help you dispute errors on your credit report, negotiate with creditors to remove negative information, and develop a plan to improve your credit score.
However, it’s important to choose a reputable credit repair service. There are many scams out there, so do your research before you sign up for any service.
Here are some things to look for in a reputable credit repair service:
- They are upfront about their fees.
- They have a good reputation.
- They offer a free consultation.
- They are members of a reputable credit repair association.
Common Myths and Misconceptions About Credit Repair
There are a lot of myths and misconceptions about credit repair floating around. It’s important to be aware of these so that you don’t fall victim to scams.
Here are some common myths about credit repair:
- You can pay to have negative information removed from your credit report. This is not true. The only way to have negative information removed from your credit report is to dispute it with the credit bureaus and have it verified as inaccurate.
- You can get a new credit identity. This is also not true. There is no such thing as a “new credit identity.” Your Social Security number is your credit identity, and it cannot be changed.
- You can improve your credit score overnight. This is not realistic. It takes time and effort to improve your credit score.
Fixing your credit score takes time and effort, but it’s definitely possible. By following the tips in this guide, you can start to improve your credit score and get back on track to financial health.
Remember, the most important thing is to be patient and consistent with your efforts. If you keep at it, you’ll eventually see results.
And if you ever need help, don’t hesitate to reach out to a reputable credit repair service. They can help you navigate the process and get your credit score back on track.
What Is a Bad Credit Score?
A bad credit score is one that is less than 670 on the FICO® ScoreTM 8, one of the credit scores that lenders most commonly use. The scale runs from 300 to 850. More precisely, a score of 300 to 579 is poor, and a score of 580 to 669 is considered fair. The table below offers more detail on where scores fall.
| FICO® Score Ranges | |
|---|---|
| Credit Score | Rating |
| 300 – 579 | Poor |
| 580 – 669 | Fair |
| 670 – 739 | Good |
| 740 – 799 | Very Good |
| 800 – 850 | Exceptional |
The three major credit bureaus (Experian, TransUnion, and Equifax) also created VantageScore®, another credit scoring model that employs a scale from 300 to 850. But its definitions associated with each score range vary slightly. VantageScores between 600 and 660 are regarded as fair, 500 to 600 as poor, and 300 to 499 as extremely poor. See the table below for a full breakdown.
| VantageScore 3.0 Ranges | |
|---|---|
| Credit Score | Rating |
| 300 – 499 | Very Poor |
| 500 – 600 | Poor |
| 601 – 660 | Fair |
| 661 – 780 | Good |
| 781 – 850 | Excellent |
Your chances of being approved for credit and receiving better terms and interest rates increase with your credit score. It may be challenging to get affordable credit or to be approved for a loan or credit card at all if your score is low.
You can think of maintaining good credit as preventive medicine. You never know when something might happen, such as a breakup that requires you to find a new apartment quickly, but having good credit can make dealing with any hardship easier.
A bad credit score can lead to these roadblocks:
- Potential rejection for loans and lines of credit. Mortgages, auto loans, personal loans, private student loans, credit cards, and certain federal student loans for graduate students and parents are a few examples of these.
- Difficulty getting a rental application approved. Numerous landlords run credit checks to assess your payment history and determine whether you’re likely to make rent payments on schedule.
- Required security deposits. When you move into a new house, utilities like gas, electricity, and water might ask for a security deposit.
- Trouble getting a new cell phone contract. Prior to accepting you as a customer, many cellular providers run credit checks, however some provide prepaid plans and other options that don’t involve one.
- Issues during an employment background check. A restricted copy of your credit report may be viewed by employers as part of the background check procedure. If you’re applying for a financial management position, they might want to check the information on your application or assess your money management skills. They won’t be able to view your credit score, but their credit report will show any actions that negatively impact it, like late payments.
- Higher insurance premiums in some states. For instance, credit report data and driving record are frequently used by auto insurance companies to determine your likelihood of filing a claim. In Massachusetts, Hawaii, or California, insurance rates are not influenced by your credit history.
Pay Your Bills on Time
Payment history is the most important factor of your credit score, accounting for 35% of your FICO® Score. Setting up autopay for recurring expenses like auto and student loan payments is one of the best ways to guarantee you never miss a payment. On the due date, your bill will be automatically deducted from your bank account, so you won’t need to remember to send a check or log into a payment portal. But make sure your checking account has enough funds to cover your payments; otherwise, you risk incurring fees.
If you find it difficult to pay your bills on time because they are all due on the same day of the month, you might be able to work with your creditors to reschedule the due dates. However, keep in mind that it might take a few billing cycles for the modification to take effect. So continue paying as required until theyve confirmed the update.
Its also important to be upfront with creditors about your ability to pay. For example, alternative payment plans for federal student loans can reduce your monthly payment amount. However, if you’re unwilling to speak with your student loan servicer about your options, you might not be aware of them. If you are having trouble making ends meet, credit card companies might also be able to temporarily lower your payment or interest rate. If you think you might miss a payment, get in touch with your creditor in advance to see what options are available.
How To Fix A BAD Credit Score ASAP
FAQ
Can you fix a ruined credit score?
How can I correct my credit score?
How do I get my credit score back to normal?
How long does it take to fix my credit score?
While you may take some actions to improve your credit, like paying down your credit card balance, it could take longer than you expect to see the results. Sometimes it can take at least a few weeks for creditors to report your payment information and companies to update your score because of it.
What are the best methods to fix my credit score?
Thankfully, there are things you can do to improve your credit score. To figure out how to fix your credit, get a copy of your credit report and immediately challenge any errors you find. Keep your credit accounts in good standing, improve your debt-to-credit ratio and nurture your lines of credit over time.
What types of services are available to help me fix my credit score?
The two major scoring agencies are FICO and VantageScore, and each scoring system operates with a range of 300 to 850, with 850 being the best credit score. Each scoring agency uses the same basic factors to calculate your score, though they weigh the factors differently in their calculations.