In just a moment, we’re going to show you a reliable set of steps to fix bad credit fast.
This post is for you if you have no credit, bad credit, or just want to boost your scores as high as humanly possible.
Probably similar to you, most parents never told their kids about the importance of good credit or what it takes to boost your credit score…
…and the truth is that, having bad credit is downright expensive.
Not only are you denied the best credit cards out there, but you also get the worst terms on car loans and home loans.
Or you may not be able to qualify for a car loan, home loan, or apartment at all.
So we’re on a mission to change that, and by the end of this post, you will know the simple steps you need to take on how to fix a bad credit score fast.
The best part about it is that all the steps are free.
Seriously, follow these steps and you are sure to boost your score in no time. Let’s get into it.
How To Find Out If You Have A Bad Credit Score
Step 1: Pull Credit Reports
Before doing anything else, you must know where you are, and what you have to work with
You can pull your credit report for all three major credit bureaus (Equifax, TransUnion, and Experian) for free by going to annualcreditreport.com.
We’ve also found that you can view your credit report for free by visiting the official sites of each credit bureau and starting a dispute online.
Lastly, you can view your credit report by signing up for a credit monitoring service such as Credit Karma.
In short, you shouldn’t have to pay to get a credit report.
The purpose is to find out what items in your credit report are causing your score to be so low.
In doing so, make sure you get a credit report for all three credit bureaus.
Generally, they will contain the same information, but they tend to show and report different things on each.
For example, you may have a collection on one report that does not show up on another, and that is something you don’t want to miss.
Step 2: Check For Errors
The next step on how to fix a bad credit score is checking for errors.
Nearly 25% of all credit reports contain errors that may be harming your credit score without you knowing.
So, now that you have your report, here are the errors we want you to look out for:
- Wrong personal information (name misspellings, wrong addresses, etc.)
- Missing accounts (on-time payments that are not showing – this is a huge one)
- Accounts that do not belong to you
- Incorrect dates
- False inquires
- Incorrect bankruptcies or foreclosures
- Duplicate accounts
- Incorrect account status, delinquencies or derogatory marks (closed when supposed to be open or late 90 days when it should only be late 60 days)
Make note of them as we learn in a second how to get rid of them.
Step 3: Check for Negative Marks
In this step on how to fix a bad credit score, we want you to make note of the derogatory marks that actually belong to you.
We will be showing you the best methods to resolve these negative marks in just a moment, so start looking for these items:
a. No credit history or very little history
We’ve all heard the phrase, “It takes credit to build credit”.
We think that actually had to do with money, but either way, it’s true for credit as well.
To get a FICO score, you need to have at least six months of credit history and one credit bureau reporting your activity.
To get the highest credit scores, you will have to have credit for at least 7 years.
b. Late payments
Payments are typically not reported late until 30 days after the due date and will be in your credit report for 7½ years.
Collections hurt your score a lot and are basically unpaid debt that is sold to collection agencies for pennies on the dollar.
You know, the ones that call you all day and night from 20 different numbers.
Collections typically happen after 5 to 6 months of late payments and stay on your report for 7 years.
d. Account charge-offs
After a period of time (after you fail to resolve the debt or can not pay), the lender will simply call it a wash aka charge it off.
Account charge-offs stay on your report for 7 years
e. High Utilization
When it comes to your credit score, high utilization is considered using more than 30% of your total credit limit available to you.
When you can’t pay for an item such as a car, the lender has the right to repossess the item aka come get it back from you.
Repossessions will stay on your credit report for 7 years.
g. Student loan delinquency or default
Private student loans that are late by more than 30 days can show up on your credit report and student loans that are late more than 90 days can show as well.
Student loan delinquencies stay on your report for 7 years.
Different forms of bankruptcy will stay on your credit report for different lengths:
- 7 years for Chapter 13 bankruptcy will stay on your credit report for 7 years, and
- Chapter 7 for 10 years.
This occurs when the bank takes the house back after failing to make payments. Foreclosures stay on your report for 7 years.
So we now know what to fix, let’s talk about how to fix a bad credit score. Here’s exactly what to do.
How To Fix A Bad Credit Score: With Report Errors
If you see items on your report that are either not accurate or “not yours”, you have the right to dispute it.
You can dispute anything you see with each individual credit reporting agency via writing or online using the dispute forms on their websites.
Credit Reporting Agencies are required to verify that information with the creditor within 30 days by law.
If the errors can not be verified, they must be deleted.
So simple rule, not yours or not accurate – dispute it.
Even if it is accurate, you should try and dispute it. Many creditors won’t go through the hassle of verifying, and you may get an easy removal just by trying.
We’re not necessarily recommending it, but there is literally no harm in trying.
How To Fix A Bad Credit Score: No Credit History or Short Credit History
If you have a short credit history, do these 4 things to help your credit score.
a. Take out a secured credit card.
Secured cards require a cash deposit, which then acts as your credit line. This means if you deposit $200 your line of credit will be $200.
The good news is that the secured credit cards report on your credit report which can improve your payment history and your length of credit.
Once your credit is improved enough, you can ask the credit card issuer to convert the secured card into a regular credit card.
The best part is that your account will remain during the transfer keeping your length of credit in place.
b. Get a credit builder loan.
They were made to actually help those with little to no credit history or those with bad credit in general.
They don’t require you to have good credit to get approved, but do require you to have the income necessary for repayment.
Speaking of loans, if you want to learn more about business loans, be sure to read this post next.
c. Become an authorized user on someone’s credit card.
This means that you are not responsible for the payments, but the account is reported on your credit report.
So, it is best to become an authorized user with someone you know has good credit-building habits as both the positive and negative will be reported.
Also, make sure the bank actually reports authorized user activity to the credit bureaus. Most do, but some do not.
According to Nerd Wallet, here are the banks that do report:
d. Report non-debt items on your credit report.
Most people don’t know, but you can actually request that your on-time rent payments show up on you your Experian credit report through Experian RentBureau.
This can be done by asking your landlord or using a third-party rent payment service.
Additionally, you can sign up for Experian Boost which can add up to 24 months of positive cellphone, utility, and streaming device payments to your Experian credit report.
How To Fix A Bad Credit Score: Late Payments
Now let’s talk about what you can do to improve your credit if you have late payments.
a. Make payment as soon as possible.
Payment history is the most important part of your credit score making up 35% of your total score making it the fastest way to help or hurt your score.
And the longer a payment is late, the more it hurts your score because 180 days late is worse than being 90 days late.
We understand that it may not be the most immediate thing you can do, but as soon as possible, at a minimum, make minimum payments.
b. Ask for a “Goodwill Adjustment”.
You’d be surprised how far you can get by simply asking a creditor to remove late payments as a goodwill gesture.
It works especially well after being on time for a while, as it proves good-faith.
Just call or mail the creditor a forgiveness letter explaining your situation. Here’s a template that you can use:
The best thing that can happen is a question away.
c. Negotiate removal by signing up for auto payments.
Does this really work? Yes, it can and it is worth it to try. But only attempt this knowing you will have the funds to cover the automatic payment.
How To Fix A Bad Credit Score: High Utilization
If you have a high utilization rate, meaning over 30%, on a monthly basis, lowering it to under 30% can improve your score dramatically.
Here are a few ways to do it:
a. Ask your issuer when they report
Many credit card companies report your balance and payment history every 30 days.
But the day they report is not always the same as your bill due date.
It could be before or after, which means you could be paying your bill on time and still showing a high utilization rate.
To help fight this, ask your credit card issuer what day they report to the credit card agencies.
Armed with the correct date, you will when and how often to pay your card so you always show the best utilization percentage.
b. Ask for an increased credit limit
There are times when your credit card issuer will raise your credit limit without your request but it doesn’t happen often.
Take matters into your own hands by asking for an increase either online or via phone.
By increasing your credit limit you automatically decrease your utilization rate.
Note that there may be qualifications to get an increase accepted as well as a hard inquiry.
So, make sure you have a good chance of qualifying before risking the hard inquiry.
Check out this post next to learn how to get business credit quickly.
c. Ask to be an authorized user on someone’s credit card.
If someone with a consistently great payment history and utilization rate allows you to be an authorized user on their account…
…it will automatically help your utilization rate as well.
d. Open a new credit card
When you get a new card, you increase your credit limit, and therefore, decrease your total utilization.
The downside of applying for a new card is that it will likely result in a hard inquiry on your credit report and can affect your average length of credit.
We don’t typically suggest this route unless you have a very long credit history and the ability to qualify for a card.
A bonus tip for your utilization is to not close unused cards.
Closing a card can result in a lower credit limit which pushes your utilization up and can lower your average length of credit if you had the card for a while.
How To Fix A Bad Credit Score: Charge-Offs / Collections
If you hate charge-offs and collections, you are not alone. Here are a few ways to deal with them on your credit report:
a. Dispute it if there is an error.
You want to check for things such as:
- wrong account number,
- outdated status,
- wrong date of delinquency, or
- a date past 7 years ago.
If any of these things appear go ahead and file a dispute based on the incorrect information.
As mentioned previously, in many cases, creditors and collection agencies are too lazy to fight the dispute.
b. Ask for a goodwill deletion.
When dealing with charge-offs and collections, ask and you shall receive – sometimes.
Go ahead and send a letter to the original creditor explaining your situation and asking them to remove the collection or charge-off.
A well-written one that points to a specific circumstance may get it removed for you.
This usually works best after you have paid the debt.
c. Write a pay for delete letter
Try sending the charge-off creditor or collection agency a pay for delete letter that explains that you will pay the debt if they remove it from your credit report.
In a sense, they need you just as much as you need them. If you don’t pay, they don’t make money on their debt purchase.
It’s not guaranteed to work, but it’s definitely a win-win scenario and something you should try.
d. Ask for a lower payoff
Remember that most debt is bought for pennies on the dollar.
This means the collection agency will likely attempt to recover the total debt amount even though they bought it at a discount.
We mean, always ask for the payoff to be reduced if you decide to pay the collection or charge off.
Explain that you do not have the money to pay the amount and if they are willing to take a number lower than 50% of the debt.
Once again, they need you to pay to make money so this tactic nearly always works.
Just know that paying off a charge-off or collections will have a minimal impact on your credit score but can help in getting a goodwill letter accepted and qualifying for other loans and lines of credit in the future.
Also, if you are close to the 7-year mark when the collection will be removed, it may not make financial sense to pay the debt off. Something to think consider.
How To Fix A Bad Credit Score: Student Loan Delinquency/Repossessions/Bankruptcy/Foreclosure
For all other negative remarks, getting them removed is nearly impossible.
a. Dispute all incorrect information
You will want to comb through these with a fine-tooth comb as information being wrong is your best bet for a miracle removal.
If you do find something that is wrong, dispute it.
2. Simply wait for them to be removed from your credit report.
Remember most of them should be removed in 7 years with the exception of Chapter 7 bankruptcy which stays on your credit report for 10 years.
3. The best thing that you can do is work to improve everything else.
That means working overtime to improve your payment history, your utilization rate, your mix of credit, and your inquiry count.
3 Extra Tips on How to Fix a Bad Credit Fast
Tip 1: Visit the credit repair subreddit on Reddit.com
If you never heard of Reddit, it is the world’s largest forum where people come together to discuss certain topics – in this case, credit repair.
As of the time of this recording, the Credit Repair subreddit called CRedit, has over 73.1k members.
It has hundreds of posts with people just like you detailing exactly how they fixed their credit.
So you need to definitely need to take a look if you haven’t already.
Tip 2: Limit the amount new and closed accounts
As mentioned previously, when you open a new account your risk ruining the other categories of your credit score – length of credit history and Inquiries.
When you close an account, you also may negatively affect your utilization and length of credit history if the account has been around for a long time.
Tip 3: Use Experian Boost
We do believe that it can be a good tool for improving your score.
Experian Boost adds up to 24 months of positive cellphone, utility, and streaming device payments to your Experian credit report.
If you have been making on-time payments with these accounts, it can provide a major boost to the heaviest weighted category of your credit score – payment history.
Check it out.
Well, there you have it – everything you need to know on how to fix a bad credit score.
If you need help with your particular financial situation, check out our CFO services today.
We have a team of financial experts who are always ready to help individuals and businesses like yours.