Struggling with Bad Credit? Here Are 7 Ways to Fix It

Your credit score is one of the most important metrics when it comes to your financial health. A bad score has the potential to make it virtually impossible for you to make major purchases, and can even make it hard to find a rental home. Fortunately, there are ways for you to repair your credit.

We’ve put together a list of some expert-backed credit repair tips that can boost your confidence and your buying power.

Understand What’s Impacting Your Credit Score

If you want to fix bad credit, you need to understand why you have bad credit. Common causes of bad credit include late payments, debts that have been sent to collections, and high credit utilization rates. Pull your credit report from all three major bureaus, Equifax, Experian, and TransUnion, and analyze them carefully.

Look for errors on your credit report, as 50% of Americans say that they’ve found at least one error on theirs. The bureaus are legally required to investigate any disputes within 30 days, and if the error is verified, it must be corrected or removed.

Remember, anything you can do to boost your credit by even a couple of points can get you started in the right direction.

Pay Down High Credit Card Balances

One of the best ways to improve credit fast is to address high credit card balances. The amount of your available credit that you’re using has a significant impact on your score, and when you have credit cards that are at or near their maximum, you’re bringing down your score. Experts recommend that you try to keep your credit utilization rate below 30%. Once you get below 30%, you should try to get closer to 10%.

Even small reductions can help improve your credit score. Focus on credit cards with high interest rates to try to get them out of the way first.

Make All Payments on Time, Every Time

Your payment history makes up 35% of your credit score, which is the most impactful component of your overall score. Late or missed payments bring your score down quickly and can stay on your credit history for up to seven years. It’s vital to catch up and stay current.

There’s virtually nothing you can do about payments that you’ve missed in the past.

Still, it’s a good idea to contact those creditors and see how you can get caught up. When you change your payment habits, you can turn the page to a new chapter of your financial story. Start making payments on time today and commit to keeping them on schedule going forward.

Consider a Secured Credit Card or Credit Builder Loan

This option may not be the best choice for everyone, but for those who have seriously damaged their credit scores, a secured credit card or credit builder loan can be a great option. If your score is very low, you’ll probably struggle to get traditional credit products. Secured credit cards, which require a refundable security deposit, offer a way to improve credit fast.

Similarly, a credit builder loan is designed to help you improve credit fast by borrowing a small amount and repaying it over time. Both tools report to every major credit bureau, so they provide you with a chance to prove that you’re a more reliable debtor than you have been in the past.

Avoid Opening Too Many New Accounts at Once

Many people fall into the trap of opening multiple new accounts in an effort to improve their credit utilization score, or to get better rates. However, opening multiple new accounts can actually hurt your credit.

Every application for a new credit line requires a hard inquiry into your credit history. Hard inquiries hurt your credit score. Instead of trying to open several new accounts, focus your energy and money on improving existing accounts.

Monitor Your Credit Regularly

When it comes to credit score improvement, knowledge is power. No one cares more about improving your credit score than you do, so it’s your responsibility to keep a watchful eye on your credit score. While hard inquiries can bring down your score, there are resources that you can use to monitor your credit without damaging your score.

You can access free credit reports annually from AnnualCreditReport.com, and many credit card issuers now offer free monthly credit score tracking. When your goal is to repair your credit, keeping an eye on your progress is crucial. Not only does it allow you to make necessary adjustments, but it also keeps you motivated.

Negotiate With Creditors or Collection Agencies

While it’s not a surefire way to improve your credit, there’s nothing to be lost by negotiating with your creditors or collection agencies.

Even if your accounts are behind, don’t assume that you’re out of options. Depending on how much you owe and how long you’ve been behind, you might be able to settle your debt for less than you owe. Another option is to negotiate a “pay-for-delete” arrangement, where the creditor agrees to remove the ding on your credit score in exchange for payment.

These negotiations don’t always work, but there’s no harm in trying them, especially if your credit score is below 600. Just be sure to get any arrangement in writing before sending payment.

Changing Your Financial Future

Taking the next step on your financial journey is almost impossible with a bad credit score. Fortunately, these seven tips can help you take your first step toward a brighter financial future.