How Can I Fix My Credit: A Two-Part Plan for Quick Growth

A journey to fixing your credit is just a checklist of items to be done, most of them to be done only once. After that, you just sit back and wait for it to work. For the most part. In this article, we provide the key items to be put on your credit growth list and set you up for climbing back into the good graces of the credit system.
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Plug the leaks

How can I fix my credit? The question is about undoing past mistakes as much as building new credit. There is no sense in trying to improve your score while it’s still bleeding from whatever’s hurting it. You stop the bleeding first, stabilize it, and then move on to treatment and rehabilitation.

Check the report for errors

It might sound like a long shot, but credit report errors are much more common than you might think. Approximately one-fifth of all reports contain errors, and some are serious enough to do major damage to your score. So, you order a free copy at and take a good look. While there are some common errors, like debts that are past their expiration date, it’s best to go line by line and check the entire thing. In case you do find any errors, you have to put them up for dispute.

There are two ways to go about disputing errors. You can contact the company where the error has happened and ask them to investigate. Alternatively, you can contact the credit bureau and ask them to contact the company on your behalf. The second option is usually a better one. The bureau has a more structured process, and they are obligated to resolve your dispute within 45 days. Also, if you are not happy with the result, you can write a short statement and ask the bureau to add it to your report next to the disputed item.

Deal with the late payments

One of the quickest ways to ruin you score is to have payments that are over thirty days late. Credit bureaus add those payments to your report and they can’t be removed for the next seven years. And the more late payments you have, the more it hurts you. So, what you have to do is to catch up on late payments and don’t let them happen ever again. The good news is that you don’t even have to wait seven years to see the results. The older those late payments get, the less influence they have over your score.

Maintain low credit utilization

Credit utilization is how much of your credit card limit is used up. We recommend that you use no more than 30% of your limit, but the lower, the better. Once you go over 30% you have to either pay down your balance or raise the limit. The latter is achieved by applying for another card or asking for a higher limit on the existing cards. Although getting a higher limit is a sound option, it could potentially lead to even more debt. Personally, we’d choose to keep low utilization by paying down the debt.

Move/merge your debt

The idea is to find a place to where your debt can be moved on favorable terms. It could be a lower interest rate or a more manageable schedule—whatever helps you keep those payments on track. Depending on your score, there are a couple options available for moving debt. People with better scores can apply for a personal loan or a balance transfer card. If you decide to go after the balance transfer, then we recommend taking a look at the Citi Simplicity®. It has one of the longest intro periods and no late fees. Alternatively, there is the Chase Slate®, which allows free balance transfers within the first 60 days.

For people with weaker scores, a more realistic option is to apply for a secured personal loan. In that case some of your property will have to be used as a collateral. And since the property—most likely your home—will be at risk, you have to be absolutely certain that you’ll make the payments all the way through.

Start building better credit

Once you’ve stopped losing points and your score is stabilized, it is time to consider your strategy for growth. A couple of options are available; let’s go over them, starting with the easiest one.

Get a secured credit card

While there are some hacks and shortcuts to getting a credit score bump, the only reliable way to grow your score is to continuously report responsible credit card use. Unfortunately, for someone with a poor score, successfully applying for a credit card is a challenge in itself. That’s where a secured card comes into play.

A secured card is not exactly a credit card, but it looks like a credit card on your report. And it’s much easier to get approved for. The reason it is easier to get approved for is the collateral. Before getting this card, you have to put up some cash as collateral. The bank will keep this cash in case you fail to make payments. Also, you can never borrow more than the amount of your collateral. So there is no way for you to borrow more than you can pay. That’s why the bank feels safe issuing those cards to whomever.

As you can see, a secured card is a fairly limited card. Still, it’s a great instrument for that single purpose of getting your credit back on track. Apply for one of those cards, use it responsibly for at least six months, and you’ll see your score going up. It is even possible that your bank will take notice and return the collateral. It is called “graduation” but not all cards do that. That’s another feature you have to take it into consideration when choosing a secured card. If we were to make a suggestion, we’d say the Discover it® Secured Card is a good place to start looking.

Get a shared card

For some people, a secured card might not be a plausible option. Say you don’t have the cash to put up as collateral, or the limit on a secured card is too low to accommodate your spending. In that case, there is an option to get someone to share a card with you. This could be done in one of two ways. One is to get someone to add you as an authorized user to an existing card. And two is to apply for a joint account with someone who has a better credit score. The key difference here is the level of trust involved. Both users of a joint account are responsible for the debt, while in an authorized user situation, only the principal user is responsible for the debt. It means that an authorized user may spend as much as he wants, but, legally, is not obliged to pay any of it back.

Apply for an installment loan

While most of your credit score has to do with your credit cards, diversifying the types of credit you have will also affect your score in a positive way. The easiest way to do this is to get an installment loan—a mortgage, a student loan, or any loan that you pay in installments. It’s possible that you already have some of those, in which case there is nothing else to do but to pay them on time. If not, then you might want to consider a secured loan. Much like a secured card, you make a deposit at a bank and then take out a loan using your deposit as collateral. Preferably a small amount, over a long period of time, at low or no interest. You might even pay most of it right away and leave a small amount dangling for a couple years. We know, it seems like a pointless exercise, but it will go a long way towards rebuilding your credit score.

The bottom line

Fixing your credit is a two-part job. First, you have to find out why you are losing points in the first place and eliminate all the causes. Second, you have to report responsible financial behavior in as many different ways as possible. We recommend starting out with a secured card and an installment loan, and moving onto better credit cards once they become available to you. That’s pretty much it—good luck!

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