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To fix a bad credit score, understand the basic contributors to credit—including whether you pay your bills on time and whether you carry balances on credit cards—and identify the factors that are making a negative impact. Checking for errors on your credit report is also an important step.
Your credit score is a three-digit number, usually between 300 and 850, that's based on the information in your credit report. It's valuable for lenders, who need to understand how likely you are to repay money you borrow.
While there are several credit scoring models with different score ranges, 700 or higher is generally considered a good credit score, while 800 or higher is excellent. If your score isn't quite in that range, here's how to get it back in shape.
What Is a Bad Credit Score?
On the FICO® Score* 8 scale of 300 to 850, one of the credit scores lenders most frequently use, a bad credit score is one below 670. More specifically, a score between 580 and 669 is considered fair, and one between 300 and 579 is poor. The table below offers more detail on where scores fall.
|FICO® Score Ranges|
|300 - 579||Poor|
|580 - 669||Fair|
|670 - 739||Good|
|740 - 799||Very Good|
|800 - 850||Exceptional|
VantageScore®, another credit scoring model which was developed by the three main credit bureaus (Experian, TransUnion and Equifax), also uses a scale ranging from 300 to 850. But its definitions associated with each score range vary slightly. A VantageScore from 601 to 660 is considered fair, from 500 to 600 is poor, and from 300 to 499 is very poor. See the table below for a full breakdown.
|VantageScore 3.0 Ranges|
|300 - 499||Very Poor|
|500 - 600||Poor|
|601 - 660||Fair|
|661 - 780||Good|
|781 - 850||Excellent|
The higher your credit score, the more likely you are to qualify for credit, and at better interest rates and terms. If your score is low, it can be difficult to obtain affordable credit or to get approved for a loan or credit card at all.
You can think of maintaining good credit as preventive medicine. You don't know when something might come up, like a breakup that means having to find a new apartment fast, but good credit can help you handle any affliction with less hassle.
A bad credit score can lead to these roadblocks:
- Potential rejection for loans and lines of credit. These can include mortgages, car loans, personal loans, private student loans, some federal student loans for parents and graduate students, and credit cards.
- Difficulty getting a rental application approved. Many landlords conduct credit checks to evaluate your payment history, with an eye to whether you're likely to pay rent on time.
- Required security deposits. Utilities including gas, electricity and water may require you to make a security deposit when moving into a new home.
- Trouble getting a new cell phone contract. Many wireless providers check credit before taking you on as a customer, though some carriers offer prepaid plans and other arrangements that don't require a credit check.
- Issues during an employment background check. Employers may view a limited version of your credit report as part of the background screening process. They may want to confirm information on your application or evaluate how you handle money if you're applying for a financial management role. They won't see your credit score, but activities that lead to a poor score—such as missed payments—will be evident on your credit report.
- Higher insurance premiums in some states. Car insurance companies, for example, often use information from your credit report, in addition to your driving history, to assess your potential risk of submitting a claim. Your credit history cannot be factored into insurance rates in California, Hawaii or Massachusetts.
How to Improve a Bad Credit Score
Credit scores aren't static; they change when the information in your credit report changes. That means you can take control of your financial health now, and make moves that will positively affect your credit scores. Here's how.
1. Check Your Free Credit Score
First, check your credit score for free to view the factors that are most affecting it.
Your credit score is most impacted by the following elements:
- Your payment history (35%), including whether you always pay bills on time or have had late or missed payments in the past.
- How much total credit you have available and how much of it you're actively using, known as your credit utilization rate (30%).
- How long you've been using credit (15%).
- The mix of credit types you've had and are currently using (10%).
- The number of recent credit accounts you've opened and applications you've made, which are known as hard inquiries (10%).
It's also important to check for any errors on your credit report, including inaccurate personal information or accounts fraudulently opened in your name. Especially if it's negatively affecting your score, dispute this information with the credit bureaus. Submitting a dispute does not affect your credit itself. But if any content in your report changes, your score could change too.
2. Pay Your Bills on Time
Payment history is the largest contributor to your credit score, accounting for 35% of your FICO® Score. One of the best ways to ensure you're never late is to set up autopay for recurring bills, such as student loans and car payments. Your bill will come directly from your bank account on the day it's due, meaning you don't have to remember to log in to a payment portal or send a check. Ensure you have enough money in your checking account to cover your payments, though, or you could be subject to fees.
If many of your bills are due on the same day of the month, making it more difficult to pay them on time, you may be able to change the payment due dates with your creditors. Keep in mind, though, that it may take a few billing cycles for the change to go into effect. So continue paying as required until they've confirmed the update.
It's also important to be upfront with creditors about your ability to pay. Federal student loans, for instance, come with alternative payment plans that can lower the amount you owe each month. But you may not know about them if you're not willing to contact your student loan servicer about your options. Credit card issuers also may be able to reduce your payment or interest rate for a period of time if you're experiencing financial hardship. If you're concerned you're going to miss a payment, contact your creditor before it happens to explore what's possible.
3. Pay Down Debt
Amounts owed make up 30% of your FICO® Score, the next largest share after payment history. The amount of your credit limit you're currently using is expressed at your credit utilization rate, and experts recommend using no more than 30% of your credit limit at any point.
Ideally, you'll pay off your credit card bill in full at the end of every month. But if you can't, and you're currently carrying a balance, make a plan to pause using your cards and pay down credit card debt. You may want to send extra money to the highest-interest card first, known as the debt avalanche method, which will save the most money in interest. Or you can pay off small balances using the debt snowball method, which may motivate you more.
A balance transfer credit card may be a better option if you need more time to get your balances down. If your credit score qualifies you for one, a balance transfer card provides an interest-free period that lets you pay off your balances without accruing as many charges over time.
To make the most of the card, though, come up with a plan that gets you debt-free within the interest-free time frame. Otherwise, you'll be subject to interest charges at the end of that period, potentially negating some of your savings.
4. Avoid New Hard Inquiries
If you're focused on increasing your score, you may want to delay applying for new credit in the meantime. A hard inquiry happens when a lender checks your credit to evaluate you for a financial product. It will appear on your credit report and may affect your credit score. That's because lenders could consider you a greater credit risk if you're attempting to borrow money from many different sources. Applications for new credit account for 10% of your FICO® Score.
Soft inquiries don't affect your credit; they occur when you check your own credit score or when a lender or credit card issuer checks your credit to preapprove you for a product. It's also likely you won't see a major effect on your score if you're shopping for a single auto loan or mortgage and apply with multiple lenders in a brief time period. Scoring models distinguish this process from, say, opening lots of credit cards at one time, and typically won't penalize your score the same way.
5. Boost Your Credit
One way to strengthen credit using your existing financial history is through Experian Boost™† . When you sign up for free, Experian searches your bank account data for utility, phone and cable payments, and you can choose which accounts to add to your credit file. Once the accounts are added, a new credit score is instantly generated. Those who have little or poor credit could see an increase to their FICO® Score thanks to the addition of new positive payment history.
6. Get Help Building Credit
If you're having trouble getting approved for a credit card or loan on your own, you can build credit history with the help of others or with a secured account. Try these strategies:
- Become an authorized user on someone else's account.
- Work with a cosigner who has good credit. When you have a cosigner for a loan or credit card, the lender also considers them jointly responsible for the debt.
- Open a secured account. With a secured credit card account, you place cash in an account and the card issuer allows you to borrow up to a certain percentage of the money.
How to Maintain a Good Credit Score
Once you've done the hard work to fix a bad credit score, keeping up the momentum is the next step. That means diligently paying all bills on time, maintaining low balances on credit cards and only seeking out new credit when necessary.
Length of credit history accounts for 15% of a FICO® Score, so you may also want to keep old accounts open to maintain a long average credit history. That could mean putting a small charge on your oldest card occasionally, and paying it off right away. If a card has a high annual fee and you're no longer using it, weigh the potential tradeoffs of a shorter credit history with the money you could save.
Credit mix, or the range of credit types you have in your name, makes up 10% of a FICO® Score. You don't need to take out a new loan merely to diversify your credit mix. But dependably managing a credit card is one of the most effective ways to maintain a good credit score. So if you haven't opened your own credit card in the past, consider applying for a secured credit card, which will require a deposit that typically also becomes your credit limit. Making small charges and paying them off each month can help improve your score, and may make you eligible for a traditional, unsecured card down the line.
If you take these steps and still find yourself struggling, getting help may allow you to get back on track. An approved credit counseling agency can help you create a plan to better manage your finances and pay down debt. You can find a state-by-state list of approved credit counseling agencies from the U.S. Department of Justice to make sure you're working with a legitimate agency.
Debt consolidation may be another option if you're struggling with a lot of credit card debt. A debt consolidation loan allows you to roll multiple high interest debts into a single payment, usually at a lower interest rate and giving you just one payment to keep track of.
Be wary of any organization that promises to repair your credit with little or no time or effort, or that claims it can repair your credit for a fee. Improving your credit status takes time. Ultimately, there's nothing a credit repair company does that you can't do yourself with time and effort.
The Bottom Line
A bad credit score doesn't have to weigh you down. There are concrete actions you can take today and in the future to improve it, and to keep your score as high as possible.
Knowing where you stand, and making it a point not to avoid the reality of your credit status, are perhaps the most important ongoing tactics in the drive to improve credit. Check your credit report and score regularly using a free online service like the one available from Experian, and feel empowered knowing you can master your own financial well-being.