How To Repair Your Credit Score

Having a good credit score brings with it many benefits. It's easier to qualify for loans with lower interest rates, including auto and mortgage loans. It can affect the type of job you are able to get and the type of neighborhood you'll be able to live in. Creditors and employers make the assumption that having good credit means you are honest and responsible.

But managing personal finances isn't something that comes naturally to everyone. Some over use credit, while others underuse it. Many have late or missed payments on their credit report. Repairing a credit score can be a challenge, but it is far from impossible. You just need to make the effort.

Knowing Where You Stand

The first step in fixing any problem is knowing where you stand credit-wise. This starts with finding out your credit score. Resources such as Credit Karma or Credit Sesame offer free access to credit scores without making an official inquiry to your credit. They also offer credit score monitoring and you can test out different scenarios you can take that might help you build your score - or damage it. The predictions made by these online tools are not guaranteed, but they can give you some idea as to what you might expect if you take certain actions.

You can get a free official credit report from the three major credit bureaus from, which will inform you of activity, but not your score, once a year for free. Look on the report to evaluate what is hurting your score - also look for anything that doesn't make sense, and inquire with those creditors (or possibly a lawyer).

Collection agencies in particular need to follow regulations set by the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. If there are high balances, work to pay them off - and you may want to negotiate with creditors to pay a lower percentage of the balance in order to have the debt reported to all three credit bureaus as paid in full.

Rebuilding Your Credit

Besides paying off debt, credit is rebuilt by having more available credit to use. This means eventually you will need to rebuild your credit by getting new credit. When you do, look for merchants and creditors that offer provisional credit with a down payment and cards that have a pre-approval process, which will increase your likelihood of being approved. Pay off balances in full each month or as soon as possible in order to minimize interest charged and improve your score.

In some cases, you may need to use secured credit cards that will report to credit bureaus. Aim for just a few cards that you can manage effectively. It is important to remember that just because credit is available to you, it doesn't mean you need to use it. A credit card utilization rate of under 30% is recommended, and it's even better if less than 10% is used. One way to use these is to make them your payment method for a couple of small predictable expenses, such as streaming services or a phone bill, and then pay them in full.

Where to Apply?

One thing that can ding your score is a simple credit inquiry followed by a denial of credit. Many credit card companies and merchants offset this by offering a preapproval process that uses a soft inquiry into your credit, which won't hurt your score. This process will tell you if you have a high probability of approval, or which of the merchant's card offerings are best suited to you. You may need to start with a secured credit card, which means you pay a deposit that will cover you in the event your bill isn't paid. Many have programs that will graduate you to an unsecured card, once you've done well with the first one.

There are other retailers that have provisional credit programs that will give small limits, and might require a down payment for purchases. When these are paid off, credit limits can rise, increasing your overall available credit and score.

In some cases, rebuilding and fixing credit is more of a challenge than others. If you find that the challenge of rebuilding credit is too great, you may want to consider talking to a bankruptcy lawyer. Bankruptcy is a valid option for getting a fresh start and reorganizing debt in a way that is easier to manage.

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