Key takeaways
- Regularly check your credit reports from all three credit bureaus for errors and dispute any inaccuracies.
- Maintain a low utilization ratio and always pay bills on time.
- Utilize tools like secured cards and rent-reporting services to fix your score.
Fix your credit score to unlock better financial opportunities and peace of mind. A bad score can hinder your ability to secure loans, rent an apartment, or even get a job. Fortunately, improving your credit score is easy. All it takes is a little dedication to better financial habits.
In this guide, we’ll go over some practical suggestions to get you started. Follow the tips below, and you can bring your score where you want it to be.
Understanding your credit score
The first step to fixing your credit score fast is understanding your score and how it is calculated. Credit scores are three-digit numbers that tell lenders how reliable you are. A higher score indicates that you will repay the money you borrow, while a lower one tells lenders you are at high risk for default.
Credit scores are derived from the information in your credit reports. Banks, lenders, and other financial institutions send data to the three main credit bureaus – Experian, Equifax, and TransUnion – which compile it into your reports. To generate your score, they use a credit scoring model that analyzes the reports and comes up with a three-digit number.
The two main scoring models are FICO and VantageScore. Both models use a range of 300-850, but the exact categories and factors that determine your score differ slightly.
The basic factors that both models consider are:
- Payment history
- Amount used
- How long you’ve had accounts
- Credit mix
- New inquiries
Paying bills on time is the best thing you can do, followed by a low utilization rate. The idea behind both is that you can pay your bills when due and are not overly reliant on borrowing money. Both indicate that you are responsible and financially solid.
If you have accounts in collections, it’s a good idea to pay them off, as it will help your utilization rate and payment history. The FICO 8 model still takes paid collections into account. However, newer FICO models and VantageScores disregard paid collections. Paying off collections is a good idea no matter which model the lenders use.
Need another chance at credit?
Discover second chance credit cards for a fresh start—click here!
What is a bad credit score?
FICO and VantageScore have slightly different definitions, but generally, a bad score is below 600.
FICO Score Ranges
- 800-850: Exceptional
- 740-799: Very Good
- 670-739: Good
- 580-669: Fair
- 300-579: Poor
Vantage Score Ranges
- 781-850: Excellent
- 661-780: Good
- 601-660: Fair
- 500-600: Poor
- 300-499: Very Poor
Bad scores are anything below 580 on the FICO or below 600 for VantageScore. To have good credit, you need a FICO score above 670 or a VantageScore above 780.
A poor credit score is below average—most consumers have a good credit score—and can be the result of missed payments, high balances, or accounts in collection. Understanding where your score falls and why is the first step to improving it.
Check your free credit score
There’s no reason for your credit score to be a mystery. Many financial institutions and personal finance apps offer free score tracking as part of their service. Check your score and keep tabs on it to know where you stand.
Reviewing your credit report
Now that you know your credit score, it’s time to review your report. You can get a free credit report from each of the major credit bureaus once a year via AnnualCreditReport.com.
Once you have your reports from all three bureaus, review them. Look for anything negatively impacting your score. If you find any negative inaccurate information, dispute it. If the negative mark is accurate, then you’ll know what behavior you need to change.
Check your credit report for errors
Your credit report contains detailed information about your accounts, payment history, and any public records.
Look for common errors such as:
- Incorrect personal information: Ensure your name, address, and Social Security number are correct.
- Errors in account information: Check that all listed accounts belong to you and that the balances and payment histories are accurate.
- Duplicate accounts: Verify that each account is listed only once.
- Outdated information: Make sure old debts that should no longer be reported have been removed.
- Inaccurate public records: Confirm that any public records like bankruptcies or tax liens are reported correctly.
If you find any errors, take the time to dispute them with the issuing bureau.
Fix or dispute any errors on your credit report
Disputing an error is not hard. First, gather documents to support your claim, such as bank statements, payment records, or correspondence with creditors. Next, file the dispute online, by mail, or over the phone with the issuing bureau. You may also want to contact the creditor who reported the incorrect information directly. The credit bureau has 30 to 45 days to investigate your dispute. Make sure to follow up to ensure that the error has been corrected.
Getting an inaccurate negative mark off your report can give an immediate boost.
Use your credit card to improve your score!
Improving your credit history
The next step in improving your credit score is to establish a positive history. This means on time payments and paying down debt.
Pay your bills on time
Payment history is a big deal. It constitutes 35% of your FICO score and 40% of your VantageScore. Consistently making on time payments is the best thing you can do. Late or missed payments will drag your score down.
To make sure you never miss a payment, set up reminders. Use calendar alerts or a bill tracking app to remind you of upcoming due dates. Or you could enroll in automatic payments to avoid forgetting altogether. Make sure you have enough money in your bank account so you don’t accidentally overdraw.
If you’re having trouble with paying bills because of when they’re due, reach out to your creditors and ask about changing due dates. You may be able to move due dates to when you’re paid or spread bills out throughout the month so you don’t have to pay everything at once.
Pay down debt
If you have overdue accounts, prioritize bringing them current. Each month with a missed payment further damages your score. Paying down outstanding debts and bringing delinquent accounts current will boost your score.
There are plenty of strategies to pay off old accounts. You can do the debt snowball or debt avalanche method. Both of these help you prioritize debts and give an effective plan for making all accounts current. Another option is to take out a debt consolidation loan. A debt consolidation loan will combine all your debts into one, ideally with a lower interest rate. This makes it easier to pay off your accounts and save money.
New
If you’ve proven that you’re trying to pay off a collection account, it may be worth contacting your creditors and asking them to stop reporting delinquent payments. They have no obligation to do this, but it can’t hurt to ask.
Limit how often you apply for new credit accounts
New accounts are a mixed bag. It’s true that if you’ve only had cards, then taking out a personal loan can improve your credit mix, which lenders like. That said, don’t take on debt you cannot afford.
New accounts can also hurt your score. Each time you apply for installment loans or cards, a hard inquiry is added to your report, which can temporarily lower your score by a few points. The impact is small and not a big deal for one application. The point is to be strategic about what you apply for and not to submit lots of applications at once.
If your application is denied, wait six months to a year before applying again. Not only does this let your score recover, but it also shows lenders that you’re not desperate to borrow money.
Want a credit card but don’t have the funds for a deposit?
Managing credit utilization
The second biggest factor in calculating your score is your utilization ratio. It makes up 30% of your FICO score and 20% of your VantageScore. Credit utilization is your credit card balances vs. your limits. In other words, the amount used. Here are key strategies to manage your utilization effectively.
Keep your utilization ratio below 30%
Aim to keep your utilization ratio below 30%; lower is even better. Consumers with exceptional scores have ratios in the single digits. A low utilization ratio shows you’re not reliant on borrowing money.
Regularly check your accounts to stay aware of your balances.
Reduce your high-balance accounts
Maxed out credit cards are good for no one and will only harm your score. Try to make multiple payments towards your credit card debt throughout the month. Use any extra income, such as bonuses or tax refunds, to make additional payments on high-balance accounts. Even paying a little more than the minimum payment can help reduce your balances faster.
Consider using budgeting apps to track your spending and ensure you are not over-utilizing your cards. Always make more than the minimum payments to keep your balances low and avoid interest charges.
Reducing high-balance accounts can lower your utilization ratio and improve your score.
Ask for a higher credit limit
Increasing your limits can help lower your utilization ratio, provided you maintain the same spending levels. If you’ve recently received a raise at work or established a positive payment history, then you have a good chance of receiving a higher limit. Call your card issuer or request an increase online. Be prepared to provide income information and the reason for your request.
By increasing your limits while keeping your balances low, you can significantly reduce your utilization ratio.
Keep old credit cards open
The length of your credit history accounts for 15% of your FICO score and 21% of your VantageScore. A longer history provides more data for lenders to consider. Keeping older cards open can help. Closing old accounts can shorten your history and decrease your cumulative limit, hurting your utilization ratio and negatively impacting your score.
If you do not regularly use an older card, keep it active by making small purchases and paying them off each month. If the card has too many fees, closing the account and taking the hit to your score may be worth it.
Want a new card?
Building a stronger credit history
There are plenty of ways to improve your profile and boost your score. Here are a few effective strategies:
Consider opening a secured card to build a positive credit history
Secured credit cards are an excellent option. These cards require a security deposit to lessen the risk to the issuer. The cash deposit is fully refundable if you close your account in good standing and typically serves as your limit.
You use the secured card just as you would a traditional card. Make small purchases and pay your bill in full each month. This lets you keep your utilization rate low and establish a positive payment history. Little by little, as you build responsible habits, your score will improve, and eventually, you can qualify for an unsecured card.
Do a little research before you apply. You’ll want a secured credit card from a reputable issuer that reports to all three major credit bureaus and doesn’t charge too many fees.
Become an authorized user to boost your score
A simple way to raise your rating is by becoming an authorized user on a credit card account belonging to a friend or family member with a strong credit history. As an authorized user, the primary cardholder’s account activity will appear on your report, potentially boosting your score. It doesn’t matter if you never use the card or even have access to it.
This method works quickly, with noticeable improvements likely as soon as the credit card issuer reports the new account to the bureaus.
Searching for a card but don’t have cash for a deposit?
Get credit for other payments to improve your score
You can improve your score by paying monthly bills, including rent and utility bills, on time. Traditionally, only card and loan payments are reported to the credit bureaus. More and more companies are now reporting other payments to help consumers build a positive payment history. Look for services that report rent, utility, phone payments, and more.
Including these additional payments can raise your rating if you consistently pay on time.
Monitor your credit score regularly to track progress
Regularly check your score and report to track your progress and identify areas for improvement. Many financial institutions offer free score monitoring services that provide regular updates. Sign up for alerts that notify you of significant changes to your report, such as a new account or hard inquiry.
Keeping tabs on your score helps you stay informed about your financial health and make necessary adjustments.
Frequently asked questions
1. What is the fastest way to fix your credit score?
The fastest way to fix your score is to address any errors on your credit reports, pay down high balances, and bring old accounts current. Consider becoming an authorized user or adding other monthly bills to your payment history. The fastest way to boost your score will depend on your unique situation. Talk to a nonprofit credit counselor for personalized tips.
2. Is it worth paying someone to fix your credit?
Paying someone is usually not worth it. There is nothing credit repair companies can do that you cannot do yourself for free. That said, if you’re dealing with complex issues or lack the time to manage them yourself, it may be worth paying a repair company to do it for you.
3. Can I fix my credit score by myself?
Absolutely. You will need to dispute errors on your reports, make on time payments, reduce debt, and keep your usage low. Gradually, your score will go up.
4. Is it true that after 7 years your credit is clear?
After seven years, most negative items are removed from your reports. This includes late payments or accounts in collection. However, not all debts are erased, and some, like unpaid tax liens, may remain longer.
5. Which of the following is a strategy for using credit wisely while improving your credit score?
The best thing to do to improve your score is pay your bills on time and maintain a low utilization rate. You can also take out a secured card or become an authorized user for a further boost.
Bottom line
Poor credit scores can be improved with a little work and diligence. Review your reports, dispute errors, and change your financial habits. Always pay your bills on time, keep your usage low, and don’t be reliant on borrowing. Over time, your score will grow.
Remember, improving your credit score is not an overnight fix. It takes continuous effort to demonstrate financial responsibility, but the effort is entirely worth it. A higher score will open doors to favorable loan terms, lower interest rates, and a more secure financial future.
