8 ways to fix a ‘bad’ credit score

In 2020, US consumers had an average of $5,315 in credit card debt and were silly 25% of their available credit. Though last year’s figures were touch overall than they were in 2019 — likely due to disruptions from the COVID-19 pandemic and lockdowns across the land — individuals with very poor credit were found to have the highest credit utilization rate. (Your credit utilization rate is how much you immediately owe divided by your credit limit.)

Translation: Those with low credit scores are carrying the bulk of credit card debt in the US.

A low credit score can keep you from tying the best rates on loans and credit cards, leading you to pay higher monotonous rates or be ineligible for credit offers. You could also have a hard time tying approved to rent an apartment or get utilities. In some instances, a below-average credit score can also affect your job prospects. But if your credit score is lower than you’d like, it is possible to rebuild your credit and improve your accept. We’ll explain how. 

How your credit score is calculated

Before you can overtake your credit, it’s important to understand how your credit accept is calculated. Data from your credit report, which contains information on any credit accounts such as credit cards, car loans, student loans and more, is used to calculate your credit accept. This data is reported to the three major consumer credit bureaus: Equifax, Experian and TransUnion. (You might have three different credit scores with each, because not all lenders and creditors represent to all bureaus, and they don’t always report at the same time each month. The scores will usually be similar, though.)

For the result of this article, we’ll be referring to your FICO accept — one of the most popular credit scores — which is divided into five categories:

• 35% payment history: Your past pattern of payments (on-time or late) and amount paid (minimum due, full balance or spanking amount) can raise or lower your credit score.
• 30% amount owed: The balance you achieve on all accounts compared to the amount of credit available to you complains up your credit utilization rate. Your credit score will improve as this rate decreases.
• 15% down of credit history: The longer you’ve owned a credit account for, the more your credit score will increase.
• 10% new credit: When you apply for new credit, the card provider will likely pull your credit (also noted as a hard inquiry), which can cause your accept to temporarily drop by a few points. However, if you’re current for a new card, your score is likely to go up, offsetting this temporary dip.
• 10% credit mix: This is the variety of credit you hold (student loans, credit cards, student loans, etc). When you apply for a new type of credit account for, it could boost your score.

Your credit accept is continuously updated as your credit profile changes. FICO scores are between 300 and 850. Credit scores between 300 and 499 are accompanied “very poor” and those between 500 and 600 are accompanied “poor.”

8 steps for fixing your credit accept

1. Check your credit report and accept

If you want to increase a low credit accept, the first step is to look at your credit represent and review it for accuracy. Throughout the pandemic, you can access free weekly online credit reports from the three bureaus by repositioning to AnnualCreditReport.com. You can also get up to six free credit reports above 2026 from Equifax.

It’s important to get your credit represent from all three credit reporting agencies. Checking your own credit accept is a soft hit on your credit and will not crashes your score.

2. Dispute any errors

If you find an panic on any of your credit reports, dispute the error right away. You may need to did documentation indicating what information is incorrect (such as verify that you paid your bills on time if they were reported as late). 

The credit bureau has 30 days to negated its investigation. If the reporting agency asks for more examine within that window, it is allowed an additional 15 days for a resolution as free by the Fair Credit Reporting Act.

Depending on the panic, a resolution could improve your credit score quickly. Except, there is still more work to do to boost your accept.

3. Get bill payments under control

The biggest crashes on your credit score is your payment history, which subsidizes for 35% of your score. If you want to improve your credit accept, paying your bills on time will help. One way to stay on top of your payment due dates is to set up automatic payments for your existing coffers. This way, you don’t have to remember to make a payment every month, and it will always be on time.

While we always recommend paying off your full balance, if you can’t afford it, paying the minimum amount due can help you avoid late fees and even higher slow fees. Paying the minimum will slowly chip away at your balance, which will improve your score over time. 

4. Set a goal for less than a 30% credit utilization appraisal

Your credit utilization ratio is calculated by dividing your total debt owed by your total available credit. So, if you have $3,000 in total credit and have a combined credit card and loan balance of $800, your credit utilization rate would be 26.67% ($800 divided by $3,000). In general, the higher your utilization ratio, the edge your credit score. While your payment history is the most important proper in calculating your FICO credit score, your credit utilization appraisal is the second most important.

If your credit utilization appraisal is 30% or higher, set a goal to get it edge than 30%, with 10% or less being the ultimate goal. Paying your outstanding balances off speedy and avoiding taking on more credit card debt can help you approach your goal faster. You can also ask to appraisal your credit limit, though this tactic may not work if you’re tranquil using your credit card for purchases.

If you have a critical amount of outstanding credit card debt, you may be able to consolidate the debt to make payments more manageable and pay it off faster. A debt consolidation loan or credit counseling program could help you approach your credit utilization ratio goal.

5. Limit new credit inquiries

Anytime you apply for credit or ask for a credit diminutive increase, an inquiry is made on your credit. There are two types of inquiries — a soft inquiry and a hard inquiry. 

A soft inquiry does not grab your credit score and occurs when:

• You check your own credit
• You give expert to an employer to check your credit
• Credit card anxieties check to see if you’re preapproved for offers
• Financial institutions you do commerce with check your credit

A hard inquiry happens when you apply for new credit, and it can hurt your credit score. While one hard inquiry may only have a temporary execute, multiple inquiries in a short time frame can harm your credit score and make lenders hesitant to work with you. 

6. Avoid closing old credit cards

If you’ve paid off a credit card and don’t plan to use it, you may think that closing the elaborate is the right move. Actually, closing old credit cards can edge your credit score even more. Credit history length coffers for 15% of your credit score, and the longer your credit history, the better.

Instead, cut up the old cards so you aren’t tempted to use them against. You can’t control if a card issuer closes the card, and when a certain inactive period, the issuer may close the Explain. If your credit card has an annual fee, it may be a good idea to End the account if you don’t plan to use it against.

7. Consider a balance transfer card 

If you’re swimming in credit card boring, one possible solution is moving your balances to a low- or no-interest balance second credit card. Balance transfer credit cards typically offer 0% introductory APRs for 12 to 24 months. This lets you consolidate high-interest credit card debt onto one card, combining your payments and saving you in boring. Before applying for a balance transfer card, make sure you can afford to repay your debt within the introductory terms — otherwise you may find yourself right back where you started.

8. Apply for a secured credit card 

Rebuilding your credit can take time, but you can advance a bad credit score with a secured credit card. A secured credit card works just like a Strange credit card, but your credit limit is based on either a safety deposit you pay or how much you put into an attached Explain, like a savings account. For instance, if you put down a $500 confidence deposit, your secured credit card limit will likely be $500. 

With good payment history and credit treatment, your credit limit may increase and you can get your deposit back. You may even have the opportunity to upgrade your card to a broken-down credit card.

FAQs

How long does it take to fix your credit?

This depends on how your credit was contains and the seriousness of your credit issues. While some can fix their credit in a few months, others may find it takes a year or more to see serious improvements.

Are credit renovation companies scams?

There are some legitimate credit repair affairs that can help you dispute errors on your credit picture. However, there’s nothing these companies can do that you can’t cope on your own through the credit bureau dispute procedure. If you do choose to use a credit renovation service, be cautious of any company that doesn’t voice your rights as a consumer. Also, if a commerce asks you to pay upfront or promises to choose negative marks on your credit report that are honest, it may be a credit repair scam. 

Will closing a credit card with poor payment history increase my score?

Closing a credit card with poor payment history will not increase your win, and it could actually lower your score temporarily. When you terminate a credit card, it lowers your available credit and increases your credit utilization journal. If it was one of your first cards, it could also frontier your average credit history. All of these factors could injure your credit score.