What’s the Quickest Way to Fix Bad Credit?

In order to find the best—or the fastest—way to fix your credit score, you’ll have to reckon with why your score is bad in the first place.

The annoying thing about your credit score (other than the immense power it wields over your financial life) is that it’s much easier to screw up than it is to fix. Heck, one late payment can partially undo years of good behavior. And the same goes for one unexpected bill or medical emergency, especially when you don’t have a well-stocked emergency fund to handle it.

Still, there are numerous ways to fix your credit score, some of which work faster than others. Fixing your score is about practicing good financial habits over time; it’s a marathon, not a sprint. Still, if you’re looking for the quickest way to fix your bad credit score, there’s one method that stands out.

But first, a quick refresher on credit scores.

In order to understand how to fix your credit score, you first need to understand how your score works, and how it got so low in the first place. To begin with, credit scores are based on information from your credit reports, which are compiled by the three major credit bureaus: Equifax, TransUnion, and Experian.

The most common type of credit score is the FICO score, which takes all the credit history info from your reports, feeds it through a semi-secret algorithm, and spits out a number on a scale from 300 to 850. The higher your score, the better your credit. Scores above 720 are generally considered great, while scores below 630 are bad. (With scores between 720 and 630, the quality of your credit can get a little murky.)

Your FICO score is made up of five primary components from your credit history. At 35 percent, your payment history is the most important part of your score, followed closely by your amounts owed, which makes up 30 percent. The length of your credit history comprises 15 percent of your score, while your credit mix and recent credit inquiries each make up 10 percent.

How was your credit score damaged?

Since your payment history and your amounts owed are the two most vital parts of your credit score, it’s likely that the source of your poor credit rating lies in one of these categories—or in both of them.

When it comes to your payment history, it doesn’t take much to lower your score. While late payments that are paid up within 30 days won’t generally hurt your score, payments that more than 30 days late or are missed altogether are going to be reported to the credit bureaus.

Once that happens, your score will take a hit. And the thinner your credit history, the more damage that late or missed payment will do.

With your amounts owed, it will depend more on the specifics of your situation. For instance, too much credit card debt or other consumer debt (like personal loans) is never a good sign, but hundreds of thousands of dollars in mortgage debt is generally seen as fine.

One thing that’s very important your amounts owed is your credit utilization ratio, which measures what percentage of your open credit card balances you’re actually using. So if you have a card with a $3,000 limit and you never spend more than $300 on it before paying it down, your credit utilization ratio will be 10 percent.

If you have bad credit, this ratio may very well have something to do with it. It’s recommended that you never use more than 30 percent of your available credit, so a bunch of maxed out cards will hurt your score, regardless of their credit limits.

And this is also why you shouldn’t close out old cards, even if you don’t plan on using them anymore—especially if you’re not using them! The higher your total available credit, the better your ratio! Not to mention that older credit accounts also help boost the length of your credit history.

The quickest way to fix your credit is …

If you have bad credit because you routinely pay your bills late, we have some bad news: There’s no quick fix to your credit. All you can do is make sure all that outstanding bills and collections accounts are paid up and start paying everything on time moving forward. It could a few years, but your score will eventually recover.

However, if your bad credit is more due to a large amount of consumer debt—and a large amount of a credit card debt in particular—then you’re in luck. There is a relatively speedy way to fix your credit and it’s … to pay off all that debt! Easier said than done, sure, but there are things you can do to speed up the process.

First things first, you’ll want to decrease your spending and increase your income. The former can be achieved by creating a tight budget and sticking to it. Similar to the principle of “pay yourself first,” you should start with the amount you want to put towards debt repayment and then build the rest of your budget from there. You’ll be surprised by how many expenses you can cut when you shift your financial priorities.

Second, increasing your income will mean picking up a side gig, getting a new job, or asking for a raise or promotion. A side hustle is probably the easiest one to achieve in the short-term, although the other two options are a bit more sustainable in the long run.

If you’re wondering what kind of hustle would suit you best, check out this list of 10 great side hustles. For advice on getting started, here are six expert tips to help you out.

Pay off your debt with a Debt Snowball.

Once you have a chunk of money set aside each month for paying down your debts, now it’s time to get serious. The more strategic you get, the more successful you’ll be. We recommend that you choose one of two popular debt repayment strategies: the Debt Snowball or the Debt Avalanche.

With the Debt Snowball method, you put your debts (including credit cards and installment loans) in order from the largest balance to the smallest. With all your larger debts, you continue to pay only the minimum balance and you put all your extra debt repayment funds towards the debt with the smallest balance.

You keep doing this until the debt is paid off. Once that’s done, you then take those extra debt repayment funds plus the money you were paying towards that debt’s minimum payment and you add them towards your next largest debt.

This is where the Snowball part of the name comes into play: Every time a debt is paid off, you roll its monthly minimum payment into the next largest debt. With every debt you pay down, you have more money to pay off your remaining debts.

Or you could try the Debt Avalanche.

The Debt Snowball method is designed to give you early victories, an important jolt of encouragement that many will need to keep going. The Debt Avalanche, on the other hand, sacrifices those early victories in the name of paying less money overall.

The method is almost exactly the same as the Debt Snowball, but with one key difference: Instead of paying off your debt with the smallest balance first, you pay off the debt with the highest interest rate first and then move on down the line, saving your lowest-rate debt for last.

In terms of your credit, there’s a simple tweak you can make to these strategies to maximize the effect on your score. First, focus on paying down your credit cards first. Next, don’t focus on fully paying off your cards entirely—at least at the beginning.

Instead, pay them down until their balances are under 30 percent of their total credit limits. Once your overall credit utilization ratio dips below 30 percent, you should see a jump in your score.

That doesn’t mean you should stop there, it’s just a way to frontload the positive effects for your credit. And while paying down a substantial amount of credit card and consumer debt isn’t exactly a “quick fix” solution, it’s still the fastest way to improve your score.

Short of winning the lottery, even the quickest solution to fix your bad credit will still require a good deal of dedication and perseverance. There’s simply no way around it.

Here on the OppLoans Financial Sense blog, we cover how people with bad credit can borrow better by avoiding predatory no credit check loans and bad credit loans like cash advances, payday loans, and title loans. Still, the best way to deal with a bad credit score is to fix it up. To learn more about how credit scores work, check out these other great posts and articles from OppLoans:

What other questions do you have about credit scores? We want to hear from you! You can find us on Facebook and Twitter.

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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.