How to repair your credit

Brian O’Connell
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Brian O’Connell
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A good credit score can empower a financial consumer. A low credit score? Not so much.

A weak credit score can lead to multiple negative impacts, like getting rejected for a home loan or paying high interest to qualify for a credit card. Additionally, most employers run credit checks on potential employees. While they can’t actually see a credit score, employers can see disqualifying issues like late or no payments, outstanding balances, foreclosures, and collection accounts.

“Many Americans suffer from bad credit,” says Eric Croak, president at Croak Capital, a wealth management firm in Toledo, Ohio. “Studies show that around 30% of the U.S. population have a FICO credit score below 601, which is the boundary between ‘fair’ and ‘good’ credit in the eyes of lenders.”

A big part of the toxic credit problem is that too many people are unfamiliar with how credit works, which can lead to poor financial decisions.

“When people don’t know how to use credit, they’re more likely to make mistakes and can end up missing payments and misusing credit,” Croak says. “That scenario leads to bad credit scores as more and more people find themselves incapable of dealing with their money problems effectively.”

Don’t let bad credit hold you back. There are solid, proven, and successful ways to fix bad credit and get you on the path to lifelong financial stability. These credit-boosting action items are at the top of that list.

Know where you stand credit-wise

Job one in fixing bad credit is checking your credit report to clarify your credit health.

You can get a free copy of your credit report from the three major credit reporting agencies – Experian, TransUnion, and Equifax – at The leading credit scoring companies will also offer free credit reports on their websites.

“Reviewing your credit report allows you to check your credit score and see which factors are pulling it down,” says Kendall Meade, financial planner at the online bank SoFi. “From there, you can formulate a plan and implement financial moves that make the biggest impact for you.”

It’s also good to check the full report and dispute any inaccuracies. “Doing so will not impact your credit score,” Meade adds.

Pay all of your bills on time

Once you know where you stand on your credit situation, review all of your regular household bills and ensure they’re all paid on time each month.

“Making sure you pay your bills on time, without any delays, is a golden rule,” Croak says. “Even one late payment can affect your credit score. If you have any accounts you’re behind on, catch up. Then, set up automatic payments so you don’t miss any future payments.”

Your credit score should start improving as the bad marks on your credit report get older as long as you don’t miss any more payments. “If you do, negative marks will appear on your credit report and you’ll have to start fixing your credit all over again,” Croak notes.

Curb your credit utilization rate

Becoming anchored in good payment management routines supports healthy finances, which signals consistency to lenders and creditors. One great way to do so is to keep your credit utilization ratio down.

Credit utilization is the amount of revolving credit a person holds on their credit accounts divided by the total credit available to that person. Creditors and lenders regularly check credit utilization ratios to see how consumers manage their debt.

“Demonstrating that you’re reliable is a big factor contributing to the core credit narrative,” says Kevin Huffman, owner of Kriminil Trading, a trading and finance analysis company in Elyria, Ohio. “Keeping your credit utilization low shows you’re not a compulsive, irresponsible borrower. Focus on using less than 30% of the available credit on your personal credit accounts, like credit cards and home equity loans.”

Get a secured credit card

Secured credit cards “can be a good option” for those with a low credit score or those just getting started on building credit, Meade says.

These cards require an upfront cash deposit to back up future purchases put on the card. As the secured card lender reports your on-time payments to the credit reporting agencies, you should start building good credit and positive momentum as a responsible borrower.

Deposits usually range between $200 and $3,000 for secured cards. They’re also not hard to find, as big card providers like Mastercard, Visa, and Discover all offer secured credit cards.

Become an authorized user

Another good credit fixing option is to join someone else on their credit card account, such as a parent or guardian, as an authorized credit card user.

“Partnering with someone with a credit card and good credit can jump-start your credit,” says Meade. “Typically, this would involve you getting your credit card tied to the authorized user’s account and being able to spend on it, with the authorized user monitoring the card.”

Credit card issuers report authorized users to the credit bureaus, which adds to your credit file. “As long as the primary cardholder makes all their payments on time, you should benefit by building good credit,” Meade adds.

Avoid applying for too much credit

Trying to obtain new credit, even when unnecessary, is a big mistake, as it can sink your credit score.

“Every time you apply for a new loan, line of credit, or credit card, lenders check your credit report,” Croak says. “This is a hard credit inquiry, or a hard pull.”

Each time there’s a new hard inquiry, your credit score drops slightly. “Even though getting new credit doesn’t mean you’re a credit risk, applying for many credit cards or loans quickly can lower your score,” Croak adds. “Lenders might think you’re trying to get more credit than you can handle.”

Hard inquiries stay on your credit report for two years but only affect your credit score for one year. “Consequently, it’s key to avoid applying for too much credit too quickly,” he says. “It’s also vital to check your credit report for hard pulls to ensure there aren’t any mistakes or duplicated inquiries.”

Brian O’Connell
Cardratings Contributor

A former Wall Street bond trader, Brian O'Connell is the author of two best-selling books: The 401k Millionaire and CNBC's Creating Wealth. His work is bylined in national finance and business platforms like, CBS News, The Wall Street Journal, U.S. News & World Report, Forbes, Fox News, and many others. Mr. O'Connell is a graduate of the University of Massachusetts and he currently resides in Palmas del Mar, Puerto Rico during the winter months, and in historic Bucks County, Pa., when Mother Nature cooperates.

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