How To Fix Your Credit – As Fast As You Can!

*This post has been reviewed by an Illinois Registered CPA. However, when making important financial decisions, it's best to speak with your financial advisor.

Last Updated on June 3, 2021

How much do you know about credit scores – specifically yours?

Having a great credit score can make the difference in multiple events in your life – the terms offered when applying for a loan, your insurance rates, and deductibles, and even whether or not you get a job. If you are struggling with your current score, you are not alone. This article will shed light on locating your credit score and, if it’s not what you envisioned, how you can work to raise it.

With time and effort, anyone can increase their credit score – so make sure to stay positive! While it may seem confusing and intimidating at first, figuring out how to get the highest score possible is absolutely within your reach!

What makes for a great credit score?

Credit scores range from 300-850. The higher your score, the better. Different resources claim different standards for what an excellent credit score is, but a 750 or higher is typically accepted as an excellent score.

Why is this so important? A credit score can impact much more than whether or not you get a loan. If you currently have a lower credit score than you would like, keep reading for some tips on how to raise your credit score to the desired level.

Who determines my credit score? How do they calculate this number?

There are three bureaus that will determine your FICO (Fair Isaac Corporation) credit score – Experian, Transunion, and Equifax. A credit score is a number calculated by each of these bureaus that determines how likely you are to repay your debts. It is based on your history with credit: how often you took out credit, how much credit you have used, how often you pay late your outstanding debt, and other factors.

Using their formulas, the number calculated is considered the most impartial way to determine the probability of paying your debts. These numbers are re-run regularly, so your credit score can and does change depending on what your most recent payment habits have been.

Where can I find more information about my current credit score?

You can use the website annualcreditreport.com to access your free credit reports. Each bureau – Experian, Transunion, and Equifax – may hold a different score on you. This may vary slightly or greatly depending on the information that each one has received on you. For example, suppose one debt has been reported to Experian as delinquent (whether or not this was correct information) but has not been reported to Transunion or Equifax. In that case, it could cause your Experian score to be much lower.

For this reason, it is important to take advantage of your yearly free credit report. In 2021, at the time of this writing, because of Covid-19, this is currently a free weekly credit report. You do not need any other website or business besides annualcreditreport.com to intervene on your behalf in order to receive a free credit report. Be wary of scammers or companies who may try to take advantage.

I am unhappy with my current score. What steps can I take to raise it?

To begin with, scores will not greatly improve overnight. Working for change takes time, and that’s okay! If a company is promising to get your score up hundreds of points seemingly overnight at a steep cost to you, it is probably too good to be true. If you truly believe you need to invoke the services of a credit repair company into your credit issues, be sure to do plenty of research before agreeing to anything.

Remember that you will be held accountable for anything that a credit repair service does on your behalf. I firmly believe you can do all the work of a “credit repair company.” You may consider trying on your own first, then working with a credit repair company if you find that you are not coming to the conclusion you hoped to have.

Steps You Can Take Starting Today!

If you are committed to making the best of a bad credit score situation, here are some things you can do to ensure your score rises over time:

• Make your payments in full and on time

The best way to ensure that you have a score you like is to make your payments and make them on time. Showing that you can borrow money and pay it back in a timely manner is the core of your credit score. Over time, your score will improve, and you will be seen more favorably by creditors. It is a simple and effective way to raise your credit score, but it will not happen overnight.

• Utilize a money plan (also known as a budget)

Knowing where your money is going and spending less than you make should be a top priority when attempting to raise your credit. Better spending habits are essential to getting your credit score under control. Spending less than you make will allow you to: pay down debt; be less dependent on debt; control what percentage of your income is being spent on interest, and give you more peace of mind.

Creating a spending plan will allow you to figure out how to best handle your money. It will also help you to understand where you may be over or underspending. Figuring this out will allow you to make adjustments and better financial habits with your own financial goals in mind.

This should be your number one plan of attack so that your credit starts turning around. Create a budget that works for your family, track it often, and make adjustments that keep you on the right path. Consider using EveryDollar, YouNeedABudget, a spreadsheet, or any other number of online resources that allow you to figure out how to spend your money in the most effective ways possible.

• Keep your overall debt lower

What percent of your debt are you using? If you can keep it lower than 50% of your credit limit, or even less, you will be taking steps in the right direction. For example, if your Visa card has a spending limit of $1000, work to spend 50% ($500) or less of that monthly. This doesn’t mean you have to spend that much on the card. It just means that at any given time, you should have less than 50% of your credit limit used on it.

Whatever amount owed, make sure to pay that card off in full and on time each month. Do this with as many accounts as possible in order to lower your credit utilization ratio. Using a budget is also helpful with this step – it can provide clarity with where you are spending and how much you owe to each account. If you are able to, pay off your credit cards, but do not close the account. This could cause your credit to take a hit.

• Fix Mistakes on Your Credit Reports

Check in with your free credit report at least once a year and fix any mistakes you may encounter. There are laws that protect consumers like you in these situations. Pull up the credit report you get and look over it with a fine-toothed comb looking for: accounts that may say you paid late, but you didn’t; accounts that claim to be yours but aren’t; or any other number of items that may be incorrect.

Fix mistakes by contacting the credit bureau and asking for an investigation to be completed. The credit bureau will ask the source who originally reported the information, and they have 30 days to respond to the inaccuracy that you have claimed. If they don’t respond in the allotted time or find the information incomplete or inaccurate, the bureau will change it. Either way, the bureau will report back to you with the results of their investigation.

Don’t falsely report true items as mistakes as this can cause you to be seen as untrustworthy. For example, some people will try to send in a lot of “inaccuracies” at once so that the bureaus will become overwhelmed and unable to process all of the claims within 30 days. They may take the inaccuracies off initially, but if they later find the claims to be fraudulent, they will change them back and hold you accountable.

If you are unhappy with the results of a bureau’s investigation, you can contact the Federal Trade Commission and the company who reported on you directly for an investigation. They have similar time limits and must report to all three bureaus if they find inaccuracies in their report.

If you are still unable to get the issue resolved, you can write a 100-word statement to be placed on your credit report. This would help you to explain the situation that caused you to have a lowered credit score, in your opinion. It would not help with the score itself but could provide some clarity to anyone looking at your credit report.

This could help in job situations, for example. If, after a few years, the information that you disputed and wrote about in your statement is removed because of timeliness, it is time to remove your statement as well. This is another reason to check in with your credit score at least yearly!

Although most people want their credit score to be excellent overnight, getting your score where you want it takes time. If you feel that you were able to make changes to your score by disputing credit report data, you may be able to take advantage of rapid rescore procedures. This does come at a price and sometimes quite steep, so if you have the time to repair your credit score more organically, aim for that process instead.

• Open a new line of credit

Another option is to open another line of credit. The goal of this is to show that you are not a risk – you will pay back what you owe on time. You can also ask a friend or family member to co-sign for you to borrow money. You may need a co-signer if your score is so low that the company does not feel you are a good candidate for a loan. If you choose this method, make sure to add the new card or loan as a line in your budget so that you can still make your full payment on time each month.

Always remember that opening new lines of credit are double edged-swords. If used correctly, you can charge a small percentage of your credit line and pay it off each month, showing you can use credit responsibly.

If used incorrectly, this could add to the amount of debt you owe. It could also cause relationships to go sour if you default on a loan that someone you had a close relationship with agreed to help you out on. Be careful when using this method.

So Now It’s TIme To Get Started!

With these tips, you should be able to start turning your score around within a few months. If you are still struggling, there are free resources available to help you find your way with your credit score and general financial goals. If your goal is to make permanent changes in your life to your future finances, you may want to consider looking into free credit counseling.

This can be for someone who needs help creating financial goals, setting up a budget, paying off debt, or who wants to learn the best ways to be successful with their money. However, this is also available for people who find themselves in desperate situations, such as being in danger of losing their homes. These credit counseling agencies will stick with you for the long haul, which will help if and when you hit a bump in the road.

Overall, your credit score is an important piece of your life, whether or not it has impacted you so far. Your credit score will affect your ability to buy a house or car, get a cell phone or set up utilities. “Research shows that employees with credit problems are less productive and have more absences than those with good credit.” per Credit Repair Kit for Dummies, p. 166*. No wonder employers want access to your credit score!

It isn’t difficult to get your credit score under control, even though it may seem intimidating and confusing. Following these steps will significantly impact your score and your relationship with money. It may not be higher tomorrow, but continued positive habits over time will help you to raise and maintain your high credit score for many years to come!

*Source: Bucci, Steve. Credit Repair Kit for Dummies. 4th ed., Wiley Publishing, 2014.