5 Tips for Turning Bad Credit into Good Credit

There’s no magic spell to turn a lousy credit score into a stellar one. But there are still plenty of steps you can take to fix bad credit.

Going from bad credit to good credit can feel impossible. It isn’t always obvious how certain choices will affect your score, and the things that will most obviously benefit your credit aren’t always easy to do.

And that’s unfortunate because your credit score is very important. Being stuck with a lousy score makes it way harder to take out personal loans and credit cards, or even find an apartment.

When an unexpected bill arises, you might even find yourself turning to predatory no credit check loans like payday loans, title loans, or cash advances just to get by!

But never fear! With a little bit of knowledge and a whole lot of dedication, you too can make your credit score increditable!

1. Learn what’s hurting your score.

As we said above, it might not always clear what will hurt your credit. So before you can start fixing your score, you need to figure out why it’s so low in the first place.

“There are many things that can hurt your credit score,” warned Mark Charnet, founder and CEO of American Prosperity Group. “Obviously, not paying on time is one of those things. Paying less than the minimum payment required or bouncing a check will also lower your score.

“There are also lesser known things that can hurt your credit just as badly. For example, canceling an inactive credit card can lower your score, even if you don’t have a balance on that card.

Being excessively obligated, meaning having too much credit, is also a negative. Frequent changes in your occupation or address can also result in a lowered score.

“Your spouse’s credit can affect you as well, so it’s important that both of you are on the same page financially.”

You shouldn’t avoid moving or getting married just because you’re trying to fix your credit score, but it’s important to be aware of these things. That way, you can be prepared for the possible credit hit and plan to counteract it accordingly.

2. Pay all your bills on time.

This is easily one of the most important and most known factors. It’s come up two times already in this very article.

“Pay your debt before due dates,” advised Jory McEachern, a credit specialist at ScoreShuttle (@scoreshuttle). “Make it a habit to pay off your credit debt once a week rather than once a month. That way, your available credit line stays the same.”

Charnet echoed the importance of paying your bills on time: “To help your credit, you should pay on time to demonstrate responsible use of your credit worthiness.

“Paying monthly bills on time like your mortgage, auto loan, or bills will raise your score over time. If possible, pay more than the minimum amount required each month.

“Long-term stability with your employment, home address, and marriage also helps keep your credit score at a good level. Regardless of their balance, you should have verifiable savings, investments and retirement accounts.”

In case it hasn’t been made clear, paying all of your bills in full and on time is one of the most important steps to fixing your credit.

3. Keep your credit lines open.

When it comes to improving your credit score, paying down your excess debt is usually a must. But don’t get too overzealous or it could come back to bite you. As Charnet mentioned, closing credit cards once they’re paid off can actually hurt your credit score.

Your credit utilization ratio—or how much of your available credit you’re using—is an important factor in your score. So long as you’re using credit responsibly, a higher amount available credit means a better ratio.

“Keep your credit card accounts open,” suggested McEachern. “Although you may have stopped using one or more of your older credit cards, don’t close them!

“Your payment history affects your credit. If you delete one or more credit cards that you’re not using, you’re also deleting your credit history and your available credit line decreases. No good!

“If you only have one credit card account, open more. You can improve your credit just by opening a variety of credit accounts, which shows that you can manage money if you pay all your credit card debt on time. Sometimes, more is more!

Of course, the temptation with having multiple open credit lines is to use them!  And the more credit you have available, the easier it will be to rack up debt. That’s not good!

If you have multiple credit cards, for instance, make sure you leave most of them at home. The less accessible you make your extra credit lines, the easier it will be to manage your finances responsibly.

“Ask for an increased credit line,” addsMcEachern. “The higher credit line you have, the more likely you are to keep a low credit card utilization which helps improve your credit.”

Having no credit lines doesn’t mean you have good credit. It means you have no credit. So generally the more credit you use, the better, as long as you (say it with us) actually pay your bills in full and on time.

4. Check your credit report for errors.

Your credit score is based on information on your credit reports, which are compiled and maintained by the three major credit bureaus: Experian, TransUnion, and Equifax.

And guess what? These reports can contain mistakes!

Here’s McEachern: “On your credit report, there are often one or many errors that you have the right to fight off on your report. By disputing these claims, your credit score can improve by more than 100+ within a few months. Everything from name spelling errors and old outdated information can be dragging down your score.”

To see if your credit is being docked due to errors on your report, all you need to do is order a free copy by visiting AnnualCreditReport.com. All three bureaus are required by law to provide you with one free copy of your credit report annually.

If you find an error, you’ll have to dispute it. To learn more, check out our blog post: How Do You Contest Errors On Your Credit Report?

5. Write a letter of explanation.

Even if there aren’t errors on your credit report, per se, that doesn’t mean that reading that you can’t take action.

“If there are any blemishes on your credit report from the reporting agencies, it is your right to write a statement that by law must be included in future requests of your profile by lenders and potential credit grantors,” Charnet told us.

The term for a document like this is a “letter of explanation.” While they’re most commonly associated with mortgage applications, letters of explanation can help overcome a bad credit score, too.

“This statement should be used to explain the reasons for the negative entries i.e. was temporarily unemployed due to the company shutting down and my inability to find employment for 6 months.

“Or an illness from you or your spouse caused a reduction in compensation leading up to the negative entries that have been rectified since returning to full-time employment. Or lastly, if there was a death in your immediate family that created a financial hardship.

“These are just examples of what may be added to your report and must be factual. In this way, potential credit grantors will not have to anticipate why there are negative entries, they will know the exact reasons and what was or is currently being done to rectify the situation to restore your credit.

“Remember the most important rule of seeking credit with a lower credit profile than you would prefer: Facts tell and stories sell. You cannot personally appear to the lending board, but you certainly write a story about yourself to let them see you through your words.”

Including a letter of explanation can have its downsides, however, especially if it means admitting a late payment has been correctly marked. Depending on the situation, it might be better to leave well enough alone.

Every credit situation is different, but these tips should apply to many different situations. Now go out, and pay those bills on time! To learn more about fixing your credit score, check out these related posts from OppLoans:

What else do you want to know about fixing bad credit? We want to hear from you! You can find us on Facebook and Twitter.

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Mark Charnet, founder and CEO of American Prosperity Group, has been in the retirement and financial estate planning field for over 35 years. Mark has numerous certifications and credentials, including Life and Health Insurance, Certified Annuity Specialist and FINRA Series 6, 63, and 65 Securities Licenses. APG’s unique approach to retirement and legacy planning allows clients to retire with confidence.
As a credit specialist at ScoreShuttle (@scoreshuttle), Jory McEachern helps individuals reach their ideal credit score so that they can qualify for all the important things in life. With ScoreShuttle’s online first-of-its-kind technology, members receive the most current updates and tips and advice on how to boost their score, fast.

The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.