5 Tips to Help You Rebuild a Bad Credit Score

When it comes to fixing bad credit, there are no overnight solutions. More than anything else, you’re going to have to learn to be patient.

When you have bad credit and no savings, you’re stuck relying on no credit check loans and bad credit loans to cover financial shortfalls. And while the right bad credit installment loan could end up being a serviceable way to cover short-term costs, other short-term loans—like payday loans, cash advances, and title loans—might leave you stuck in an even deeper financial hole.

In the long-term, finding the best bad credit loan is not going to be a viable solution. Instead, you should be focused on addressing the root of the problem: your credit score. Improving your credit will help you apply for better personal loans at lower rates, allowing you to leave the world of bad credit storefront and online loans behind you.

Here’s the good news: Rebuilding your credit score is actually pretty simple! Here’s the not-so-good news: That doesn’t mean it’s easy. Much of the advice that we dispense in this article still requires a fair amount of financial discipline; there are no silver bullets. We can provide you with a road map to better credit, but you’ll still have to make the journey yourself.


1. Pay your bills on time.

There are a total of five factors that make up your credit score. There’s your payment history, your total amounts owed, the length of your credit history, your credit mix, and your recent credit inquiries. Out of those five categories, your payment history is by far the most important, comprising 35 percent (over one third!) of your total score.

As such, the best way to rebuild a bad credit score is to start paying your bills on time. And when we say that, we mean all your bills all the time. Given the damage that one late payment can do to your score, a single misstep can partially undo years of patient work. As it turns out, lenders and other companies that check your credit really hate missed or late payments.

If paying your bills on time has been difficult for you, it’s time to make a plan. Set up e-bills and auto-alerts from your various accounts so that you get notified when a bill has been posted or payment is nearly due. Create a billing schedule for yourself to help you properly budget. If your payment dates are causing you headaches, contact your creditor and try to have them changed.

Ultimately, you’ll want to get to a point where bills like utilities, insurance, and loan payments are paid automatically so that you don’t have to worry about them.  And with credit cards, make sure that you stay on top of them. If a bill isn’t something that you can “set and forget,” then create a process whereby forgetting it is virtually impossible. Your credit score requires it.

2. Pay down your debt.

While your payment history makes up 35 percent of your total score—more than any other single factor—your total amounts owed makes up an additional 30 percent. Together, they comprise an astounding 65 percent of your score. The third largest category, length of credit history, meanwhile, only makes up 15 percent.

In case our point isn’t being made clear: The amount of debt you owe is a very important part of your credit score.

If you have bad credit, it’s likely that you have taken out too much debt. And it’s not like all debt is weighed equally either: $10,000 in credit card debt is a problem, for instance, while $10,000 in student loan debt is well below the national average. As such, a lousy credit score probably means you have too much high-interest consumer debt—which is to say, you owe too much on your credit cards.

In order to pay down this debt, you’re going to need a plan. Two of the most popular strategies out there are the Debt Snowball and the Debt Avalanche. Both involve putting all your extra debt repayment funds towards one debt at a time while making only the minimum payments on your other debts. The difference is that the Debt Snowball prioritizes paying off your smallest debt first, while the Debt Avalanche priorities your debt with the highest interest rate.

But no matter what debt repayment strategy you use, you’ll need to create a budget in order to free up the extra funds. Budgeting beginners can check out this handy first-timer’s guide, complete with a free downloadable spreadsheet. You might even consider getting a second job or side gig to earn some extra debt repayment cash.

Lastly, be mindful of your credit utilization ratio: Try to never spend more than 30 percent of your total credit limit on any of your credit cards. Getting your total revolving debt load below 30 percent will help your score, and keeping it below the line moving forward will make sure it sticks. If needed, pay off your cards frequently to prevent your outstanding balances from crossing that 30 percent threshold.

3. Keep your old cards open.

The length of your credit history might pale in comparison to your amounts owed and your payment history, but it still makes up 15 percent of your overall score. Basically, the longer you have had accounts open and in good standing, the more it demonstrates your financial responsibility.

As you are paying down your credit cards, it might seem like a good idea to close those old cards once they’re paid off. But closing older cards could actually hurt your score by shortening the average length of your credit accounts. It might seem counterintuitive, but it’s better to leave those old cards open.

The reverse is true as well: While opening up some new credit cards might help improve your credit utilization ratio, it’s also lowering the average age of your credit accounts, hurting your score. Additionally, opening up a bunch of new cards means applying for a bunch of new cards and incurring a number of hard credit inquiries. This will, likewise, hurt your score.

While it’s good to use those old cards every once in a while just to make sure that the account stays active, keeping those accounts open will mean leaving yourself open to temptation. The worst thing you could do is start using them to rack up unnecessary, expensive, and harmful debt. Don’t keep them in your wallet, and make sure they’re stored somewhere that isn’t easy to access.

One last note: If you have an open credit card on which you also have some late or missed payments recorded, closing that credit card will not make those late/missed payments vanish from your credit report. Even after a credit account is closed, the record of the account is kept for up to seven years. If you want a record struck from your credit report, you’ll have to put in a little more work …

4. Stop dodging debt collectors.

A great way to sink your payment history is to have unpaid bills that get sent to collections. These collection accounts then get recorded on your credit history, dragging down your score. And while it might be tempting to avoid those debt collectors’ oh-so-fun phone calls, doing so isn’t going to help your financial situation. In fact, it could make it even worse.

If you dodge a (legitimate) debt collector’s phone calls, they could end up taking you to court. If the judge then rules against you, the debt collector could have your wages garnished in order to pay back your debt—and sometimes additional court fees, too. All of this information will be recorded on your credit report, making good credit all the more difficult to achieve.

Instead, you should meet these debt collectors head on. Make sure that you know your debt collection rights before engaging with them—and keep an eye out for debt collection scams—but do your best to work with them towards an equitable solution. Debt collectors are used to collecting less than the total amount owed, and they might be happy to settle for a smaller number if it means they get to stop trying to track you down.

Once your debt collection account is paid up, you can talk to the debt collector (very politely) about having the account removed from your report. The debt collector is under no obligation to do this, but there’s absolutely no harm in asking. If they tell you it’s been removed, you can request a free copy of your credit report at AnnualCreditReport.com to double check.

5. Be patient.

Rome wasn’t built in a day, and a bad credit score isn’t going to be fixed in one either. Even winning the lottery wouldn’t necessarily fix your credit overnight. (On the other hand, winning the lottery would also mean not having to worry so much about your credit score, but that’s neither here nor there.)

We mentioned up top the importance of financial discipline in improving your credit score, and a sizeable portion of that discipline will go towards staying patient. While paying down your debt quickly can provide a rather quick boost to your score, building a solid payment history is going to take years to fully pay off.

In the meantime, you should also focus on building up a well-stocked emergency fund to pair with improving your score. Even if your score isn’t yet high enough to qualify for a traditional personal loan, having the funds on-hand to cover an unforeseen bill or other financial shortfalls will mean that you don’t have to borrow any money at all either way!

Improving your credit score is a marathon, not a sprint. But it’s a race well-worth running. In addition to building your score, you’ll be building a set of better financial habits that will benefit you for years to come. To learn more about improving your financial practices, check out these other posts and articles from OppLoans:

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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.