It’s important to note that repairing bad credit is a bit like losing weight: It takes time and consistency and there is no quick fix. In fact, out of all the ways to improve a credit score, quick-fix efforts are the most likely to backfire, so beware of any advice that claims to improve your credit score fast. The best advice for rebuilding credit is to manage it responsibly over time. If you haven’t done that, then you need to repair your credit history before you see credit score improvement. The tips below will help you do that. They are divided into categories based on the information used to calculate your credit score.
3 Important Things You Can Do Right Now
- Check Your Credit Report: Credit score repair begins with your credit report. If you haven’t already, request a free copy of your credit report and check it for errors. In particular, check to make sure that there are no late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts is correct. If you find errors on any of your reports, dispute them with the credit bureau.
- Setup Payment Reminders: Making payments on time is one of the biggest contributing factors to your credit score. Some banks offer reminders through their online banking portals that send an email or text message reminding you when a payment is due. Amplify Credit Union, for example has account alerts for payment due dates and many other account activities. You could also consider enrolling in automatic payments to have payments automatically debited from your bank account.
- Reduce the Amount of Debt You Owe: Reducing the amount you owe can help improve your credit score. Start with avoiding using your credit cards except in an emergency. There are two options to paying down your debt faster. One would be to pay down the higher interest rate accounts first, while still paying minimum payments on the lower rate accounts. The other option would be paying off the cards with smaller balances first. The feeling of accomplishment with keep you energized while reducing your debt. The choice is yours.
More Tips on How to Fix a Credit Score & Maintain Good Credit
The FICO score is used by the majority of lenders, and is based on the credit scores from Equifax, Experian, and TransUnion.
Payment History Tips
Contributing 35% to a FICO Score calculation, this category has the greatest effect on improving your scores, but past problems like missed or late payments are not easily fixed.
Pay your bills on time. Delinquent payments and collection accounts can have a major negative impact on your FICO Scores.
If you have missed payments, get current and stay current. The longer you pay your bills on time, the more your FICO Scores should increase. Older credit problems count for less, so poor credit performance won’t haunt you forever. The impact of past credit problems on your FICO Scores fade as time passes and as recent good payment patterns show up on your credit report. If you are having trouble making payments, contact your creditors or see a legitimate credit counselor.
Outstanding Debts Tips
This category contributes 30% to a FICO Score’s calculation and can be easier to clean up than payment history, but requires financial discipline and understanding the tips below.
Keep balances low on credit cards and other “revolving credit”. High outstanding debt negatively impacts a credit score.
The most effective way to improve your credit score in this area is by paying down your revolving (credit card) debt. In fact, owing the same amount but having fewer open accounts may lower your score, so simply moving the money around is not effective. Closing unused credit card accounts as a short-term strategy to raise your scores is also not helpful. Avoid opening new lines of credit to increase your capacity. The inquiry and new account could lower your score rather than raise it.
Length of Credit History Tips
If you have managed credit for a short time, don’t open new accounts too rapidly. New accounts will lower your average account age, which will have a larger effect on your scores if you don’t have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.
New Credit Tips
Do your rate shopping for a given loan within a focused period of time. FICO Scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.
Re-establish your credit history if you have had problems. Opening new accounts responsibly and paying them off on time will raise your credit score in the long-term.
Remember that it’s OK to request a credit report for your own use. This won’t affect your credit score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.