How to Fix Your Credit in 5 Steps

Whether you love or hate it, credit defines modern life—and great credit scores makes it easier to get loans, credit cards, mortgages and more. Unfortunately, consumers with fair or bad credit scores usually don’t qualify for best credit deals. If you’re wondering how to fix your credit, you’re in the right place. Without further ado, here are five of the best ways to improve your credit score:

1. Get a copy of your credit report and your credit score
2. Fix errors on your credit report
3. Build a good credit history and keep your credit accounts healthy
4. Maintain a balanced debt-to-credit ratio
5. Review the age of your credit accounts

Credit repair takes time—and considerable effort—but it’s worth it. When you’re done, you’ll find it easier to qualify for competitive financial products, so you’ll spend less money on interest over time. Let’s explore those five tips in a little more detail.

1. Get a Copy of Your Credit Report and Your Credit Score

Credit repair begins with a copy of your credit report. After all, without your credit report in hand, you won’t know what needs fixing, or how to fix your credit. Three major credit bureaus exist in the United States:

• Experian
• Equifax
• TransUnion

Because of the Fair Credit Reporting Act, you’re entitled to a report every year from all three of those agencies. What won’t you find on any credit report? Your credit score. That’s where ExtraCredit comes in.

Our newest product, ExtraCredit, incorporates a tool called Track It, which includes all three of your credit reports. You can also see 28 FICO scores. Lenders use FICO scores most often to make yea or nay decisions. Track It also monitors each credit report. When things change, you’ll receive an immediate alert.

What Information Does a Credit Report Include?

Your credit report begins with your basic details—your full name, your birth date, your address, past addresses and so forth. Credit reports should no longer include details about liens and judgments, but bankruptcies do still appear. 

Next, you’ll see an informational breakdown for each line of credit you have. Account time, account age, number of payments made, missed payments, late payments and other facts are all included. Payment history, credit utilization, credit type, account age and credit inquiries all factor into your credit score.

After a set period of time—seven years or 10 for a chapter 7 bankruptcy—accounts “fall off” your credit report. That means they don’t appear any more and no longer impact your credit score.

2. Fix Errors on Your Credit Report

Genuine credit blunders are hard to stomach, but they are real. Errors, on the other hand, need extraction. If you notice a mistake on your credit report, you have two options:

• Generate a dispute with the credit bureau online, on the phone or via email
• Hire a credit repair company to do the heavy lifting for you 

Many people take a DIY approach to minor errors. If you’ve been the victim of identity theft, on the other hand, you’ll probably need a professional helping hand. In either case, document the error thoroughly and file a separate dispute with each applicable credit bureau.

How Can I Raise My Credit Score in 30 Days?

Credit bureaus must respond to disputes within 30 days and have to remove erroneous information immediately, so if you report a genuine error, you could see your score change for the better within a month depending on other factors in your credit report.

3. Build a Good Credit History and Keep Your Credit Accounts Healthy

Healthy credit accounts create healthy credit scores. A full 35% of your credit score depends on your payment history, and just one missed or late payment can knock you down a grade. Late payments can stay on your record for a full seven years, so try your best to stay on schedule.

Credit mix is another factor—in fact, your account mix makes up 10% of your credit score. Why? Because lenders want to know that you can handle both types of credit accounts responsibly. Try to balance installment accounts like car loans and mortgages with revolving credit accounts like credit cards and lines of credit. 

Finally, don’t apply for too many credit accounts in a short space of time. If you do, those hard inquiries could cause your score to take a hit. Instead, rate shop over a couple of weeks to get a good card or loan deal and then don’t apply for another account for a few months. 

4. Maintain a Balanced Debt-To-Credit Ratio

Got a $5,000 credit limit on that new card of yours? Don’t spend it all at once. In fact, don’t spend it all—ever. Instead, keep your credit utilization to a minimum—never more than 30%—to improve your credit score. In a nutshell, up to 30% of your credit score depends on this type of self control.

Credit utilization—or debt-to-credit ratio—is all about proof of responsibility. When you keep your credit utilization between 10 and 30% of your total available credit, lenders see that you’re a responsible consumer. If you have a $5,000 credit limit on your card, for example, don’t spend more than $1,500 in any month.

5. Review the Age of Your Credit Accounts

Older revolving or installment accounts kept in good standing look great on your credit report. Bureaus look at all your accounts and calculate an average to come up with your credit age, so try not to close your oldest credit cards or lines of credit. Roughly 15% of your credit score hinges on your average credit age. 

If you’re new to the credit world, apply for a credit builder or secured credit card and use it sparingly to begin generating a credit history. Credit builder loans can help in that regard, too. Over time, you’ll appear on each bureau’s radar, and you’ll become eligible for better credit offers.

A Recap on How to Fix Your Credit

From FICO to VantageScore, credit is a major player in consumer finance. Thankfully, there are things you can do to improve your credit score. To figure out how to fix your credit, get a copy of your credit report and immediately challenge any errors you find. Keep your credit accounts in good standing, improve your debt-to-credit ratio and nurture your lines of credit over time.

You don’t have to do any of this by yourself. Credit.com’s ExtraCredit is a multifaceted solution which can help you build, guard, track and restore your credit profile. Even better — whenever you sign up for a personalized financial offer via ExtraCredit’s Reward It program, you’ll earn cashback. After all, you deserve a treat for taking care of your credit profile.

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