How to Improve Your Bad Credit Score

Guide Note Having a bad credit score can affect your ability to get approved for financial services or job opportunities. Follow these steps to improve your credit score.

Table of Contents

How to Improve Your Bad Credit Score Tips

  1. Make sure your credit report accurately reflects your accounts.
  2. Work with your lenders to get current on delinquent accounts.
  3. Pay off high interest credit cards as soon as possible.
  4. Closing accounts may only make things worse.
  5. Stay consistent with your plan, and don't be afraid to ask for professional help.

Disclaimer The content in this page is not a substitute for professional financial advice. Please contact your financial adviser before using the information presented here.

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Introduction

  • A bad credit score can be improved with a little dedication and determination. Just follow these steps and you'll be on your way!

Step 1: Get Your Credit Report

  • To get a good picture of what your current credit is, you have to see what is actually on your credit report.
(Creative Commons photo by Casey Serin)
(Creative Commons photo by Casey Serin)
  1. Under federal law (FACT Act) you can get a free copy for your credit report from each of the three national credit agencies every 12 months.1
  2. Go to annualcreditreport.com and request a copy of your report -- this is the only authorized site to get your free annual credit report.2
  3. Since you can get a free copy from each of the agencies once a year, you can spread out the requests and get one from a different agency every 4 months.2
  4. If there are any errors on your credit report, file a credit report dispute.3
  5. Getting a copy for your own credit report will not affect your score.4 Make sure you get it directly from the credit reporting agency or through an authorized organization.5

Step 2: Get Current On Payments

  1. Get current on past due accounts. Your payment history makes up 35% of your credit score.7
  2. Recent late payments weigh more than older late payments, so it's never too late to start paying past due accounts.8
  3. Contact your creditors to make payment arrangements. Lenders don't want to turn your account over to collections, so in most cases, they will try to work with you.9
  4. Don't wait until your account is sent to collections. A collection account will stay on your report for seven years, even after it's been paid off.5
  5. If any of your accounts have been sent to collections, make sure you know your rights.10

Step 3: Pay Down Your Credit Cards

  1. Paying the minimum amount will not cut it. You'll end up paying a lot of interest and the debt won't be paid down for a long time.12
  2. Pay off the debt with the highest interest first.13
  3. Stop using your credit cards. Accumulating more debt is no way to improve bad credit.7
  4. Don't apply for more credit. With a bad score, you'll likely be denied for credit anyway, and another inquiry will negatively affect your score.14

Step 4: Don't Close Your Accounts

  1. Owing the same amount with less accounts may be more harmful than having more accounts open.15
  2. It's generally advised to keep your debt percentage to about 30% of your total available credit.11
  3. If you have a lot of accounts, know which accounts to keep or close first.16
  4. Having older accounts can help your score.17 It's better to use an older card if you have to charge anything.11
    • - It's much more beneficial to manage your money and pay down the accounts you already have.18

Conclusion

  • Rebuilding your credit takes time. Stick to your plan and be patient. Your debt will go down and your score will go up eventually. If you need professional help managing your money, find approved credit counseling agencies in your area.19

References for How to Improve Your Bad Credit Score

  1. ↑ Federal Trade Commission: FTC Issues Final Rule on Free Annual Credit Reports
  2. ↑ 2.0 2.1 Federal Trade Commission: Your Access to Free Credit Reports
  3. ↑ About: Disputing Credit Report Information
  4. ↑ The Plain Dealer Money Matters: Checking credit report directly won't affect score
  5. ↑ 5.0 5.1 myFico: Improving your FICO credit score
  6. ↑ 6.0 6.1 Federal Reserve Board: 5 Tips for Improving Your Credit Score
  7. ↑ 7.0 7.1 About: 10 Things You Can Do Today To Improve Your Credit
  8. ↑ Experian: Improve your credit
  9. ↑ Generation X Finance: 15 Ways to Establish and Improve Your Credit History and FICO Score
  10. ↑ Bankrate: Debt collectors calling? Know your rights
  11. ↑ 11.0 11.1 11.2 11.3 MSN Money: 7 fast fixes for your credit score
  12. ↑ Bankrate: The true cost of paying the minimum
  13. ↑ Bankrate: What debt to pay off first
  14. ↑ About: What You Need To Know About Credit Inquiries
  15. ↑ Experian: Improve your credit score
  16. ↑ About: 5 Credit Cards You Should Never Close
  17. ↑ MSN Money: 4 credit-scoring myths
  18. ↑ CNN Money: Controlling Debt
  19. ↑ U.S. Trustee Program: List of Credit Counseling Agencies Approved


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