Fixing your credit might seem complicated, but it’s actually a simple process. It doesn’t take special expertise to do it and most times, you’re the best person for the job. Not to mention, working with a credit repair company can be expensive. 

Don’t drop hundreds of dollars on credit repair if you don’t have to. You could always take the DIY route by cleaning up your payment history, disputing inaccuracies, and paying down debt. 

Once you realize how simple it is to fix your credit, you’ll wonder why you ever considered a credit repair service in the first place.

Check Your Credit Report & Dispute Any Errors 

The first step to fixing your credit is knowing what it looks like. Recent credit score statistics show that 54% of people never check their credit. Getting a hold of your credit report gives you a roadmap to fix your credit rating. 

There are a few ways you can check your credit report for free: 

• Visit each of the credit bureau websites (Experian, TransUnion, Equifax) and view what’s reporting to your credit for each one. 
• Visit www.AnnualCreditReport.com for a free report once a year.
• Use credit tracking services like Credit Karma for an estimation of your score and free credit reports.

Due to the pandemic, the major credit bureaus currently offer free weekly credit reports from 

AnnualCreditReport.com until April of 2022. So it’s the ideal time to start tracking your credit. 

If you’re planning to use services like Credit Karma, keep in mind the score they give you is a VantageScore. Most lenders use FICO credit scores, so many people don’t consider it to be a “real” credit score. Usually, your FICO scores and VantageScores are similar, but they do differ.  

It’s best to get your credit report straight from the source. After getting your free credit reports, go over them with a fine-tooth comb. You’re looking for errors or inaccurate information. Match up bank statements, major transactions, and balances with your credit file. 

You might not find anything. That’s typical. But if you do, there’s a chance of boosting your credit score by disputing it. If the items on your credit report are all correct, it’s not worth your time to dispute them. Just take responsibility and focus on other strategies for improvement. 

If you do find errors, there are some solid steps you can take to get them removed. 

1. Make a copy of your credit report along with the documents proving the error.
2. Highlight the error(s) on the credit report and send correct documentation with it.
3. Write a letter or process an online dispute with the credit reporting agency you found the error with. Also include an explanation of each error you’re disputing. Attach all the necessary documents they ask for. 

If you’re sending a letter, make sure it’s sent with certified mail and spring for a return receipt so you know it’s been received. Once you start the dispute, the credit bureau has to investigate it within 30 days and respond.

The Federal Trade Commission gives a sample letter for each bureau you can use to start your dispute. You can also find more detailed information about the dispute process on their website.

Improve Your Payment History

Your payment history makes up 35% of your overall FICO credit score. So when your payments are consistently late, it takes a toll on your credit rating. 

The worst part? Missed and late payments stay on your credit history for up to seven years. Even after you’ve caught up on your payments.

The best move to improve your credit score is to get your monthly payments under control. This takes time and planning, but it starts with making a budget. It doesn’t have to be complicated. A simple layout of each bill’s due date and when you get paid can do the trick. 

Take it a step further by reviewing last year’s tax returns and bank statements for accurate figures of how much money you bring home annually and monthly. Then you can start deducting your monthly expenses from your income. Things like:

• Rent/Mortgage
• Student loan payments
• Credit cards
• Personal loans  
• Car note or lease
• Insurance payments
• Utilities 

This is important because you need enough money coming in compared to what’s going out. Then budget for obligations that don’t involve your credit scores. Gas, entertainment, groceries, clothing, hobbies, and savings. 

You could also opt to go digital with your budget. Most banks have online banking with financial management tools or at least a notification system. They allow you to create the same layout, but with less math. 

There are also tons of budgeting apps out there to help you build and maintain a living budget. Money Under 30 listed some of the best budgeting tools sorted by goals. Once you regain control, you can start setting bills on auto-pay so you don’t miss other payments in the future.  

For the bills that don’t allow auto pay, you should pay them as soon as the bill arrives. Don’t let a missed payment from a forgotten bill mess up your progress. Not only could it result in a low credit score, but you could end up with a collection account if it goes unpaid for too long.

Improve Your Credit Utilization 

Your credit utilization is your total revolving debt divided by total available credit. Let’s say you own one credit card with a limit of $5,000. Holding a $2,300 balance on that card brings your credit utilization ratio to 46%. Could be better. Bring the balance to $1,450 and you’re good.

Most experts suggest a credit utilization ratio of 30% or below. This general rule will give you an achievable utilization rate to work towards if your credit card balances are super close to your credit limit. We all have to start somewhere. 

To get the best credit scores that you can, you’ll want to keep your credit utilization below 10%.

Dealing with bad credit as a result of excessive debt can feel overwhelming and impossible at times. That’s why you need a plan of attack. This is where your budget comes in. Set a payoff date and then reserve money each month to chip away at your revolving debt. 

There are other ways you can improve your credit utilization ratio too:

• Consolidate high-interest credit card debt. This can be done with a personal loan, balance transfer, or even a home equity loan.
• Set up alerts with your credit card issuers. Turn on text and email notifications to alert you when you’re close to the credit limit. 
• Increase your available credit. Open a new credit account without using it or request a credit limit increase from your credit card company. Just be careful, a credit limit increase could mean a hard inquiry. 
• Use the avalanche method or snowball method. This can accelerate your debt repayment. 

Aim for 30% to start. Once you gain more experience in your credit journey, you should start going lower. You might be surprised to find that people with 800 credit scores typically keep their utilization below 10%. 

If you have bad credit, your utilization ratio is likely closer to 50% or more. Your utilization is a big part of your credit score, making up 30% of how your score is calculated. 

By keeping your credit utilization ratio low, you’re showing potential lenders responsibility with your available credit.

Paying down credit card debt is an effective way to improve your credit score significantly. 

Pay Off Any Outstanding Debts

Credit repair organizations can help you dispute inaccurate accounts on your credit history, but they can’t erase outstanding debts. If you have accounts in collections affecting your credit scores, there are a few things you can do to improve your credit or give you a fighting chance. 

Before you contact a credit repair company, try these tactics first to tackle outstanding debts: 

• Arrange a payment plan with your creditor. If you’re unable to pay the original unpaid or collections balance, your creditor might offer a payment plan instead of taking the loss. If that works, be prepared not to miss any payments.  
• Pay off the outstanding debts in full. If you come into extra cash, you can save yourself some credit issues. Paid collections accounts still show on your credit report and affect your score, but future lenders are more likely to work with you if they’re closed and paid.
• Work with a credit counseling service. The National Foundation for Credit Counseling offers help for people struggling to manage debt. They review your credit profile and develop a payoff plan with you. They may even negotiate with creditors on your behalf.
• Wait it out. If all else fails, keep in mind that unpaid/collections accounts stay on your credit report for seven years from the last missed payment. If it’s already been a few years, you might be able to wait until it falls off for your credit to improve.

Don’t Close Old Credit Cards

Keeping your credit cards open after you’ve gathered the discipline to pay them off seems counterintuitive. Trust me – you don’t want to close your old credit cards after you’ve paid them off. You might think you’re making the responsible move, but it has the opposite effect.

Here’s why you don’t want to close those old credit cards:

• Lowers your average age of credit history
• Reduces your available credit
• Could raise your credit utilization ratio

If your credit card isn’t charging you an annual fee, then keep it. Be aware that some creditors have a policy of closing inactive credit cards, which also drops your credit score. To avoid this, you can make a small purchase every few months and pay it off. 

In some cases, it still makes sense to close the credit card though. If you have a costly annual fee or don’t trust yourself with the available credit, it might be less trouble to close it. You should also close it if it’s an old secured credit card from before you transitioned to an unsecured card. 

Get your security deposit back and close out the old secured card!

Don’t Take Out New Credit Unless You Really Need It

When you start improving your credit, you’ll notice something strange. The higher your credit score gets, the more credit accounts are offered to you. Getting your first credit card offer in the mail is often a validation of moving in the right direction. Just don’t jump at the chance to apply.

Other times it can be downright annoying.

Shopping at Target–  You’re pre-approved!

Opening your email– You’re pre-approved!

Making a deposit at the bank– You’re pre-approved! 

Yes, I know. Now, leave me alone. Thanks to a provision in the Fair Credit Reporting Act, you could choose to opt-out of those prescreened offers to take the pressure off. 

Don’t get me wrong, these are good problems to have. However, It can be tempting to open new credit accounts just because they’re available to you. Don’t fall for the trap. The only time you should apply for new credit is when you need it. 

Why? Because each new credit application creates a hard inquiry that stays on your credit for two years. The impact on your credit score for each one is small, at a loss of one to five points each, but these can add up. Remember, you’re in this to improve your credit score. 

Don’t postpone your goal to rebuild credit by overdoing it on new credit applications. Instead, choose your hard inquiries wisely and try to limit them to important purchases. That could be a:

• Car loan
• Mortgage or new apartment
• Setting up utilities
• Debt consolidation loan

When you do need to apply for a new credit account, like a car loan or mortgage, be sure to shop around to different lenders within a 14-day timeframe to have all similar inquiries counted as one. (Note that this shopping window does not apply to credit cards.)

FAQs

Can I Pay Someone To Fix My Credit?

You can pay a credit repair agency to fix your credit. Before signing up, you should know the limitations to what they can accomplish. In some cases, it might be more useful to do it yourself anyway. 

Plus they’re usually expensive. On average, they charge anywhere from $50-$100 per month, and it takes up to a year to reach the finish line. 

Reputable credit repair companies should advise you on timely payment practices and attempt to remove errors from your report, but not much else. The same thing you’re reading about now. For free. 

They don’t have the power to remove anything that isn’t inaccurate. So it’s the same thing do it yourself credit repair aims for, but it costs you hundreds to thousands of dollars, according to Experian. 

Untrustworthy credit repair companies are notorious for scamming customers with practices prohibited by the Credit Repair Organizations Act (CROA). If you’re still considering hiring someone to fix your credit, watch out for these red flags: 

• Promising to remove old debts even if they’re accurate. They’re not capable of doing that. They may misrepresent your information to credit bureaus.
• Not giving an estimate of how much time or money it will take.
• Offering to create a new identity using a credit privacy number.

How Fast Can You Repair Bad Credit?

Repairing poor credit takes time. There’s no avoiding that. Still, you can’t help but wonder how long it takes to build credit. 

Take your pick. Credit counseling, credit repair service, or DIY – No matter what method you choose, you should be thinking months, not days. At a minimum, you need three months to see any measurable improvements in your score. Getting to good credit takes some people years. 

For Credit Strong credit builder loan users, the average improvement after three months of on-time payments is 25 points. The average credit score impact after 12 months was 70 points. Overall, it depends on where your credit score is now and how far your goal is. 

How Can I Raise My Credit Score in 30 Days?

Raising your credit score in 30 days is tricky. Disputes may not work because it takes 30 days just for the credit bureaus to investigate. Creditors only report to the credit bureaus once every 30 days in most cases. You may have to adopt several tactics at once.

• Opening a credit builder loan.  
• Getting a credit limit increase in order to drop your credit utilization rate.
• Paying down other high-interest debt. 

Even if you’re doing all of these, the timing has to be precise for all of the improvements to show up within 30 days. Again, rebuilding your credit isn’t a short-term process. 

All in all, fixing your credit on your own will empower you to take control of your finances. You don’t need to pay a credit repair agency hundreds of dollars when you know your finances the best. It also makes you rethink your relationship with credit and debt. 

The steps you’ll have to take are simple in theory, but putting them into practice can be difficult at times. Start small with finding out where you stand by getting a free credit report. From there you can dispute inaccuracies, build a budget, and start paying down debts over time. 

Make it a habit to check in with your credit history by making the most of annual free credit reports. Once you rebuild your credit, the maintenance process becomes easier and easier. 

CreditStrong helps improve your credit and can positively impact the factors that determine 90% of your FICO score.

Start Building credit today