How To Fix Your Credit Score In Ten Easy To Follow Steps

how to fix your credit score

How To Fix Your Credit Score

If you’re interested in the details of how to fix your credit score, we’re here to shed light on the subject.Do you have a bad credit score?  If so, you’ve got lots of company.

An estimated 30% of Americans have bad credit, including people with good incomes. A bad credit score isn’t something you can just brush off. Banks use them to decide whether to give you personal loans or mortgages.

how to fix your credit score

Credit card companies use them to determine whether to give you a credit card, not to mention what interest rate to charge. Even people who want to do damage control on their credit scores are often unsure what they should do. Getting a handle on how credit scoring works will help you with the big picture.

It can be done. It just takes some time and a bit of careful financial management.

Let’s take a look at some tips on how to fix your credit score.

Tip 1: Trim Credit Card Balances

Credit bureaus hate high balances on credit cards. Hate them. They’ll ding your score hard, even if you only have a high balance on one of several cards.

High utilization reads like risk to the credit bureaus. Almost any reduction of a high credit card balance will improve your score. Getting it down to the recommended 30% may well be one of the fastest answers to how to fix your credit score.

Tip 2: Pay Bills on Time

Credit scores give a lot of weight to your on-time payment percentage. If you’ve got a track record of late payments, that hurts your score now. That percentage will keep hurting your score until you get it close to 100%.

Every bill you pay on time improves that percentage by tiny increments. This is one that takes patience, but disciplined bill payment will improve your credit score over time.

Tip 3: Settle Collections

Any open collections on your credit report damage your score. Get in touch with those creditors and see what they have to offer. Most will offer you a payment plan of some kind or a reduced payment to close it immediately.

Paying off collections in full is the best case scenario for your score. That said, settling the debt for some lesser amount and getting the collection closed is better than leaving it open.

Tip 4: Fix Errors on Your Credit Report

Just because something appears on your credit report, it doesn’t make it true. Approximately 20% of credit reports are believed to contain errors. These errors can cost you in terms of your overall credit score.

Make a point to review your credit reports and ask the bureaus to remove any errors. This can lead to an immediate boost to your credit score.

Tip 5: Get a New Line of Credit

The credit bureaus want to see that you can handle multiple forms of credit.

If your main form of credit is credit cards, look into taking out a personal or automotive loan. If you’ve never had one before, get a credit card.

how to fix your credit score

Getting new credit can be tough if your score is shaky. A secured credit card is one way to get a new line of credit. You basically deposit a set amount with the credit card company and they give you a credit line in that amount.

The new line of credit lets you improve the mix and make on time payments. It’s a double bonus for your score in the long term.

Tip 6: Limit Your Credit Applications

Every time you apply for credit, the lender performs a hard inquiry. Each hard inquiry puts a little dent in your score. The occasional hard inquiry is both fine and expected.

If you apply for a bunch of credit at the same time, it hurts your credit score a lot more. You look like you’re in financial trouble, and the credit bureaus adjust your score accordingly. 0-1 inquiries per year is ideal, though 2 per year won’t send up any red flags.

Tip 7: Keep Existing Accounts Open

You might be tempted to close credit card accounts you don’t use. Don’t do that. Those credit cards with no balances improve your overall utilization score. That makes you look better to the credit bureaus and boosts your score.

Tip 8: Authorized User Status

Another way to boost your score is to find a very kind person with great credit that will let you become an authorized user on one of their credit cards. When the credit card company issues you a card, it goes on your report. You glean the benefits of the other person’s good credit and on-time payments.

If you do find someone willing to do this for you, the best thing you can do is put that card in a lockbox and forget it exists.

Tip 9: Pay Twice Monthly

Credit card companies report balances every month, but that day is probably not your bill due date. If your card company reports on the 21st of the month, and your due date is the 25, you’ve probably racked up some charges by then. It looks like you’re constantly carrying a higher balance.

how to fix your credit score

Paying out smaller amounts twice a month keeps your balance at a more representative level when the company reports it.

Tip 10: Up Your Credit Limit

A credit limit increase lowers your credit utilization score without needing to pay down the balance. This approach works best when you aren’t likely to use that additional credit. You’ll also need to be on good terms with your credit card company to get them to agree to the increase.

Not every method discussed above will work for everyone. In fact, deciding how to fix your credit score will depend on your circumstances.

If you’re just starting to repair your credit, increasing your credit card limit is probably out of reach. Furthermore, if you’ve been working steadily on credit score repair, a secured credit card won’t make sense.

What does make sense is working to improve your credit score. It always benefits you.

Have some thoughts on how to fix your credit score? Leave a comment below. Got questions? Check out the About Us page or shoot me an email.

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6 Comments

  1. Thank you for sharing this valuable information! It has been very helpful to me. I am just starting my adult life, as I am 20 years old and I am looking toward the future.

    So, when I’m ready to apply for a loan I will be prepared, because of the tips you provided in your post. Now I am fully aware of how to manage my credit score and set myself up for future success.

    The best part about the post is the tip to schedule a payment twice a month. I never thought about that… 

    Thank you!

    • Gedas – Thanks for your comments.  I’m am pleased to hear the post was helpful.  I’m also excited to hear that this information is helping you to think about your financial future.

      If you want a better life for yourself, improving your financial situation includes understanding how important it is to keep a good credit score.

      In addition to making payments twice a month there are also many other tips in this post that will get you on the road to good credit.

      So, bookmark this site and keep referring back to it, as more great content is available at creditsquared to help you manage your credit intelligence.

      Patrick

      Credit Squared

  2. Hey Patrick, Not only do I like your site but I also enjoy your posts.

    The information is very different from what I have read on other personal finance websites. Great job!

    Now I understand the mistakes I have made. I closed an existing account after fully settling my card last month.

    In the future, I will take note to keep existing accounts active to maintain my credit score. This will definitely help me in the future.

    I look forward to visiting your site and learning more from your insightful posts.

    • Maxx – Thanks for your comments about the post.  I’m glad it was helpful to you.

      Now you have some tools to work with to fix your credit score going forward.

      In the future, keep your accounts active and always make the minimum payments.

      It shows the credit agencies that you are paying on time, which is critical to maintaining a good credit score.

      Patrick

      Credit Squared

  3. I am struggling to improve my credit score so this came across my search at a perfect time.

    I had no idea that lowering the balances to the 30% mark would make such a difference – or that settling a collection action would improve the score as well.

    I always thought it would just drop off if it were settled or not.

    Great information and thank you!

    • Amy – Thanks for commenting.

      I’m glad the post has been helpful to you.  In addition to the items you pointed out there are other things you can do to fix your credit score.

      Some really easy wins can include limiting your credit applications, keep existing accounts open and pay your bill twice a month.

      Doing this as well as some of the other suggestions in the post, will slowly improve your credit score over time.

      Patrick

      Credit Squared

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