- Before attempting to change your score in any way, obtain a copy of your credit report.
- Use a credit monitoring service to evaluate which aspects of your score need improvement.
- Paying bills in full and on time can have a massive impact on your score.
- If you’ve experienced identity theft, protect your identity first before working on your credit score.
- It can take days to years to improve your score.
How To Fix Your Credit In 7 Steps
Whether you’ve experienced bankruptcy, identity theft, or simply missed a few payments, you’re not alone in experiencing credit woes. In fact, 1 in 3 U.S. consumers has a subprime credit score.
However, you can improve your credit score over time by following the steps below.
Check Your Credit Report
Before attempting to fix your credit, get a copy of your credit report. A credit report will reveal both accurate and inaccurate information, giving you a stronger idea of how your score is calculated.
One in five people have an error on their credit report, and while it may seem minor, inaccurate information can take a serious toll on your score. If you find any inaccurate information on your credit report, dispute it with the credit bureau immediately.
It’s important to regularly check your credit report, as errors can significantly affect your credit score. Disputing inaccuracies is the first step in managing your credit health. Remember, it’s not just about correcting errors; understanding your credit report provides more insight into how lenders view your financial behavior, allowing you to make more informed decisions about credit management.
Check Your Credit Score
If all information is correct, use a credit monitoring service to check your credit score. Your score isn’t something to experiment with — making changes you think might improve it may hurt it. Instead, determine why your score has dropped so you can make intentional decisions to improve the specific aspects of your score that need it.
Pay Bills On Time
Payment history accounts for 35% of your FICO credit score, making it incredibly important to pay your bills on time. If this category of your score needs improvement, consider putting your bills on autopay to prevent missing a payment going forward.
Make Credit Card Payments In Full
If you pay only the minimum balance on your cards, you’ll carry a balance over to the next month. The remaining balance will be hit with interest fees, which can cause your debt to grow quickly. The higher your debt balance, the higher your credit utilization ratio may be, which can impact your score negatively.
Instead, try to pay the entire balance each month. If you’re strapped for cash, pick up a side hustle or use a budget to find areas you can cut back your spending.
Keep Your Credit Utilization Ratio Low
If you’re unable to pay the bill in full, try to at least keep your credit utilization ratio low. Your credit utilization ratio is the amount of debt you owe in comparison to your total credit limit. For example, if you have a total credit limit of $1,000 and a $500 outstanding balance, you’ve used 50% of your credit.
Experts recommend keeping your credit use at no more than 30% of your credit limit. If your ratio is too high, lowering it will likely require you to pay off some of your outstanding debt, but it can improve your score.
Maintaining a low credit utilization ratio is key to a healthy credit score. It’s a clear indicator to lenders of your ability to manage credit responsibly. If you’re consistently using a high percentage of your available credit, it might be time to evaluate your spending habits and financial strategies. This isn’t just about improving a number. It’s about fostering financial stability and discipline.
Keep Old Cards Open
It may seem counterintuitive to keep old lines of credit open, but the length they’ve been around makes up 15% of your score. This is because lenders and creditors want to know you’ve got some experience managing credit before working with you.
The length of your credit history is calculated by adding the age of your oldest and newest accounts and then dividing by your total number of accounts. Here’s an example:
| Oldest Account Age | Newest Account Age | Number of Accounts | Average Length of Credit |
|---|---|---|---|
| 15 | 2 | 4 | 4.25 years |
Closing an old account can reduce your average credit length, which can lower your score. Here’s what it might look like to remove the oldest account in the example above.
| Next Oldest Account Age | Newest Account Age | Number of Accounts | Average Length of Credit |
|---|---|---|---|
| 10 | 2 | 3 | 4 years |
Recovering from identity theft can be a challenging and lengthy process. It’s important to take immediate action to secure your personal information and dispute unauthorized inquiries. Remember, credit repair after identity theft is an ongoing process of vigilance and regular monitoring to safeguard your financial identity and gradually rebuild your credit standing.
Don’t Apply For New Credit
Applying for several new lines of credit in a short period of time can signal to lenders that you’re desperate for funds. Unless it’s absolutely necessary, refrain from applying for new lines of credit until you’ve worked on the other aspects of your score.
How To Fix Your Credit Score After Identity Theft
If you’ve experienced identity theft, there are a few actions you should take before diving into improving your score:
Secure your information immediately. 29% of identity theft victims are repeat victims. Protect your information as soon as possible to avoid it happening to you again.
Dispute hard inquiries with the credit bureaus. When a criminal steals your identity, they may apply for a variety of credit products, causing hard inquiries in your name. This can take a serious hit on your score.
If you notice several hard inquiries on your credit report, contact the three credit bureaus to dispute them.
Sign up for a credit monitoring service. Once you’ve caught and disputed any actions taken without your permission, register for a credit monitoring service. This will allow you to monitor any changes to your score, while also showing you any details you might’ve missed.
How Long Does It Take To Repair?
In a best-case scenario, it can take a few days to a few months to repair your credit score after identity theft. In other cases, it may take years to see substantial growth in your score.
Is It Worth Paying Someone To Fix Your Credit?
If you hire a credit repair company, you’ll pay anywhere from $50 to $150 per month for their services. However, credit repair companies cannot request upfront payment, according to the Credit Repair Organizations Act, so this charge will come after they’ve provided the services they promised.
That said, a credit repair company cannot remove accurate information from your credit file. They can only remove inaccurate information. If you’ve examined your credit report yourself and know that the information is correct, it does not make sense to hire a credit repair company.
If you’ve found inaccurate information in your credit report and are unable to dispute it yourself, hiring a credit repair company may make sense.
What Is The Fastest Way To Fix Bad Credit?
There is no quick solution to fixing your credit score. However, focusing on small, consistent payments can improve your score faster than you think. This is because your payment history makes up the bulk of your score.
How Long Does It Take To Repair Credit?
It depends on what’s bringing your score down. For example, it could take years to rebuild your score after filing for bankruptcy. On the other hand, it may only take a few months to fix your score if a recent hard inquiry is the only issue.
Find out more
- Credit Repair Companies: Explore options with best credit repair companies.
- Credit Repair Costs: Understand the credit repair cost associated with professional services.
- Credit Score Monitoring: Choose the best credit score monitoring services to keep track of your progress.
- Challenging Credit Report Items: Learn how to challenge items on your credit report.
- Removing Collections: Find out how to remove collections from your credit report.
- Improving Credit Score Quickly: Get tips on how to build credit fast.
- Credit Score Factors: Discover what affects credit score.
- Understanding Credit Scores: Learn what is a good credit score and how to achieve it.
