How to repair bad credit (2024)

Good credit isn’t built overnight, but bad credit can be improved with time and effort.

If your credit scores aren’t where you want them to be, one of the best ways to repair bad credit is by practicing good habits such as paying down your credit card balances each month. For some, the process might also involve disputing errors on credit reports or using a more aggressive debt payoff strategy.

Understanding your credit score and report

It can be difficult (if not impossible) to improve your credit without a basic understanding of credit reports and scores.

If you want to review your credit profile to find out where you’ve got room for improvement and start building up good credit scores, these are two factors to look at:

Credit report: A credit report documents your debt-related activities. When a creditor reports your account information to any of the major credit bureaus — Equifax, Experian and TransUnion — that information appears in your report.
Credit score: A credit score is a number that reflects the information in a credit report and helps creditors predict how likely you are to repay debt. Credit scores typically range from 300 to 850 points and the higher the score the better.

Payment history

Several factors affect your credit scores, but none more so than your payment history.

Payment history looks at whether or not you’ve made on-time payments on loans and lines of credit, plus other factors, such as if you’ve had overdue bills go to collections or if you’ve filed for bankruptcy within the prior seven or 10 years, depending on the type of bankruptcy. Your payment history accounts for 35% of your score with FICO, the company that calculates the most widely used credit scores.

If you’re trying to improve your credit, one of the best things you can do is stay current on your debt payments. This means paying at least the minimum due by the due date each month. If you miss just one payment, your score could suffer.

What is credit utilization?

Your credit utilization, or your debt-to-credit ratio, is an important component of your “amounts owed,” which makes up 30% of your FICO credit score.

How to identify and resolve credit report errors

Reviewing your credit reports is crucial to improving your credit, as it can help you catch errors that could be hurting your scores.

If you find incorrect information on your credit reports, such as a collection account that doesn’t belong to you or a payment that was incorrectly reported as late, you have the right to file a dispute and get it removed.

Here’s how you can go about handling credit errors:

Visit AnnualCreditReport.com to pull your credit reports (from each credit bureau) for free.
Review the reports for errors relating to debt accounts, credit applications and names or contact information you’ve never been associated with.
Find the section of the credit report that instructs you on how to file a dispute.
Submit your dispute to the appropriate credit bureau and, if applicable, include documents to support your claim.
Wait up to 30 or 45 days for the credit bureau to investigate and resolve the matter and another five business days for them to inform you of their response.

Strategies for paying your debts

Making the minimum payments on your debt can help you improve your credit scores. However, it won’t necessarily reduce your debt, since interest charges are added to the debt until you pay off the full balance.

To lower your credit utilization and get out of debt, consider a combination of one or more of these debt payoff strategies:

Avalanche method: Save money on interest and pay off debt faster by using the avalanche method, which involves paying extra toward the debt with the highest annual percentage rate (APR) until it’s paid off, then shifting your focus to paying off your next highest APR account.
Debt consolidation: Use a debt consolidation loan or balance transfer credit card to pay off accounts with high APR and consolidate them into one new account with a lower APR.
Professional support: Talk to a certified, nonprofit credit counselor to get personalized advice and to see if a debt management plan or other relief is an option.

Make bill payments on time

Late payments on credit cards and loans are the last thing you want to deal with since they can result in late fees and damage to your credit scores.

Here are a few ways to make sure you don’t miss a payment:

Auto pay: Log into your accounts to set up automatic monthly payments so you don’t miss due dates in the future.
Pay early: Submit your payment a few days early to account for slow processing, bank holidays or other potential delays.
Change your due date: Check to see if your creditor will allow you to change the monthly due date on your account to better align with when you’re paid.

Monitor your credit score

If you have a bank account or a credit card, you may be able to see a version of your credit score for free by logging into your account. If that’s not an option, you can sign up for free score access through credit monitoring services, including:

Credit repair services

If you have poor credit, you might be tempted to go to a credit repair company for a quick fix. According to the Federal Trade Commission (FTC), many of these companies are scams.

“Be wary of ‘credit repair’ or ‘credit restoration’ outfits, especially ones that charge a monthly fee,” said Allison Sanka, accredited financial counselor with Journey Financial Wellness.

While these companies claim they have ways of fixing bad credit, they often do what you can do for yourself for free: file disputes. Instead of paying a credit repair company, Sanka recommends using those funds to pay down your debt.

If you want a better alternative for improving your credit scores, consider a service such as Experian Boost, which adds non-debt bill payments to your Experian credit report. Just keep in mind this route isn’t a cure-all, since these services only impact certain versions of your credit score and lenders might not use the score versions that are impacted.

“Often when people need to improve their scores, there’s a reason, like they want to buy a house or need a new car,” Sanka said. “A big mistake is thinking they can control or game the system and find a workaround to improve their credit quickly. Unfortunately, moving the needle on credit scores takes time, persistence, habit, changes and most of all, patience.”

Frequently asked questions (FAQs)

Keeping old credit cards open is not necessary for building and maintaining good credit scores, but it definitely helps. That’s because closing credit cards, especially older accounts, can reduce the average length of your credit history, your available credit and your credit mix, all of which can lower your scores.

It takes a minimum of 30 to 45 days to see any improvements in your credit scores. If you make a big change, such as having a serious error removed from your credit reports, you could quickly see a significant improvement. But in some cases, it could take anywhere from a few months to a couple of years to see substantial changes in your score after taking steps to improve your credit.

Yes, credit cards for bad credit are available if you are rebuilding your credit (and there are also options if you don’t have a credit history). Look for cards without a credit score requirement or secured credit cards that require a refundable cash deposit.

For students looking to build credit from scratch, start by asking a family member with good credit to add you as an authorized user on their credit card. If that’s not an option, consider applying for a student credit card or a secured credit card, and then make sure to pay off the full balance each month.