How to fix your credit

Take these 7 steps to fix your credit score and regain financial independence

by Kate Williams, Ph.D. ConsumerAffairs Research Team
Woman holding gold credit card


Rejection never feels good, especially when the rejection is for financial assistance that can help you get a new car, a house or a credit cards to pay for major purchases. If you’ve been rejected for a loan, mortgage, credit card or job because of your low credit score, you probably feel defeated. You might feel like there’s no point trying to do better because you’ll always get rejected. But here’s the thing.

Your credit score is always changing because it’s based on your financial habits. What you see on your credit report is a snapshot in time, and it can change for better or for worse every month. There are several things you can do on your own to improve your credit score, though in many instances seeking help from a credit repair company is the fastest way to fix your credit score.

pile of three credit cards

Who this guide is for

I’ve prepared this guide with the following audiences in mind:

  • People with bad to terrible credit (300-629) who can’t get a job, loan, mortgage or credit card because of their low credit score

  • People with fair credit (630-689) who want to improve their score so they have either good or great credit to get the best interest rates on loans, mortgages and/or credit cards.

  • Victims of identity theft who are trying to fix their credit

  • People who have experienced unexpected and/or catastrophic life events that have ruined their credit, such as divorce or jail time
Laptop on desk with notebook


There’s a lot of information out there about basic ways to improve your credit score, so I dug deep to find out the less common, but just as effective, things you can do to go from bad or fair credit to good or great credit. I consulted with representatives from the Federal Deposit Insurance Corporation (FDIC) and Equifax as well as Dan Sater, nationally recognized credit expert, author of “The Top 20 Credit Mistakes” and founder of

In addition to consulting with experts, I read six books on the topic of credit repair and over a dozen online articles to bring you the comprehensive information you need to raise your credit score and get the best rate on your next loan, mortgage or credit card.

Credit score on laptop

The difference between good and bad credit

Put simply, your credit score tells lenders how likely you are to pay them back if they lend you money. “Your FICO credit score measures the likelihood of you being 90 or more days late on a payment,” says Sater. Every company has their own measurement for determining what qualifies as poor, fair, good and excellent credit, which can make it difficult to figure out exactly where you stand. Here’s a general breakdown to give you an idea of where you fall on the spectrum of poor to excellent credit:


  • 300-629: Poor
  • 630-689: Fair
  • 690-719: Good
  • 720-850: Excellent


As you can see, there is a huge range for poor credit (also called subprime credit). You’re more likely to qualify for credit in the form of credit cards, loans and mortgages when your score is 500 and above than when it is 300-499, but with very high-interest rates. Some employers will run your credit report as part of their background check to asses your risk as an employee, and they might reject you if you have poor credit. They are within their rights to do so, and you have the right to get a free copy of your credit report within 60 days of their notification. If you’ve been denied a job because of your bad credit, you need to raise it fast before the problem accelerates.

To get the best interest rates, you want a score of 720 or higher. As of April 2015, the average FICO score for Americans was 695. The good news is, it’s not impossible, or even difficult, to go from a low 500 credit score to a 720, even if you’ve been the victim of identity theft or have had other life circumstances like a divorce get in the way of your credit score. All it takes is knowing what to do and giving your score time to reflect your newly formulated good credit habits.

Woman holding receipts

Your credit score’s 5 worst offenders

Pretty much every financial decision you make affects your credit score in one way or another, but some mistakes are worse than others. Here’s a breakdown of what brings your credit score down so you can figure out where you went wrong and start correcting your mistakes:


1. Not paying bills on time

This is a biggie since bill payment accounts for 35 percent of your total credit score. Late bills, including bills in collections, charge-offs and judgments, can knock your credit score big time. You don’t even need to pay habitually late. Just a few late payments, even if they never go to collections, can be enough to drop your score.

Getting your credit card bills current by paying them on time is crucial for bumping up your score. You’ll see a noticeable difference after just a few months of paying all your bills on time.


2. Maxing out your credit cards

“If you have everything else perfect but have five credit cards maxed out, you’ll lose 100-125 points” on your score, according to Sater. That could drop you from a 750 to a 625, meaning you could easily go from having excellent credit to subprime credit, just by maxing out your cards. This shows how easy it is for your credit score to fluctuate. It is also a relatively simple problem to fix.

The most obvious thing to do if you’ve maxed out all of your available credit is to start paying it off. If you’ve come upon hard times, though, or just want to raise your score faster than it’ll take going this route, you can also try asking your creditors to raise your limits. Because your FICO score is based on the amount of debt you owe compared with your available credit, having a higher amount of credit available reduces your debt ratio and raises your score.

Your best bet, if you haven’t maxed out yet but are concerned that you will, is to call your creditors ahead of time to see if they’ll raise your limit. They might be reluctant to raise it if they think there’s a good chance you’ll default on your payments due to the large amount of debt you’ve amassed.

For good credit, aim to keep your debt ratio under 30 percent, and for excellent credit (and/or if you are going to be applying for a major loan soon), keep your debt ratio under 10 percent.


3. Mistakes on your credit report

Here’s something you might not know. The credit reporting bureaus don’t have a credit file for every individual in this country. When your credit is pulled, it’s done so based on an algorithm that only makes sure most of your information matches what’s on the report. This means it’s really easy for someone else’s bad credit history to impact your credit score, without any ill intention on the part of the other person.


4. Identity theft

Another major cause of mistakes on a credit report is identity theft. “Professional identity theft that we’ve all been warned about only accounts for about a tenth of the identity theft cases I see,” says Sater. A more common, and more alarming, identity theft perpetrator is a close friend or family member who is desperate for credit and uses your personal information to obtain it. “It’s amazing how many family members and close friends step over the line,” says Sater.

The only way you’re going to know if there are mistakes on your credit score, whether accidental or as a result of identity theft, is by checking it routinely. By law, you are entitled to one free credit score from each of the three major credit bureaus every year. Experts agree it’s best to spread these out throughout the year so you can keep track of your credit score for free every four months. If you do find a mistake, contact the bureau immediately as the process can take anywhere from a month to a few years to get cleared up.


5. Bankruptcy

Bankruptcy is a major red flag to creditors since it indicates you are a high risk for paying back your debt. But sometimes declaring bankruptcy is your best option, and the amount it affects your credit score will lessen with each passing year. Chapters 11 and seven bankruptcies stay on your credit score for 10 years, while Completed chapter 13 bankruptcies stay on your credit report for seven years.

Man looking over financial documents

Stop worrying about these 6 things since they won’t improve your credit score

Your credit score reports a lot of your financial habits and history, but it doesn’t include everything. A lot of people make the mistake of obsessing over things that have no bearing on their credit report, wasting time when they could be focusing on paying down their debt and checking for mistakes. Here are some things that won’t show up on your credit report (although they aren’t necessarily things you want to completely ignore):


1. Income

Your income isn’t listed on your credit report, so don’t stress about how much you make. Now, if you have a chance to make more money that you can put towards paying down debt, then that will affect your credit score. At the same time, taking out a high amount of credit compared to your income will bring down your credit score.


2. Going to jail

Going to jail sucks, and it can wreak financial havoc on your life depending on whether or not you can keep up with payments. But your credit report doesn’t keep track of your jail time. Because going to jail happens unexpectedly, a lot of people end up missing payments and have a hard time keeping up with their financial obligations. So while jail time doesn’t show up on your credit report, the consequences of lost income, limited access to mail, loss of control over your finances and the difficulty of finding someone to responsibly handle your finances and pay your bills on time while you’re imprisoned can all end up damaging your credit.

If you do find yourself with a low credit score after a stint in jail, follow the steps listed above to get back on track and seek advice from a credit repair specialist.


3. Not paying taxes on time

You shouldn’t put off paying your taxes on time just because it doesn’t show up on your credit report, but if you’re focused on building credit and have to choose between paying off a credit card or paying your taxes, the former is the only one that will impact your credit report. Of course, not paying taxes has its own consequences, including the potential for jail time, which can negatively affect your credit score.


4. Utility bills

Your utility bills only impact your credit score when they go into collections. As long as you are paying them off in a reasonable enough amount of time to keep collectors at bay, the credit bureaus will never know about them.


5. Paying off collections

“Paying off a collection doesn’t help you at all from a credit standpoint,” says Sater. Contrary to popular belief, once you have a bill in collections, your credit score is already negatively impacted. Regardless of what the collections agency tells you over the phone, your credit score won’t improve with your payment of the bill. You might want to pay your collections off for other reasons, but it won’t improve your credit score. If you’re tight on cash and have to choose between paying on a loan or credit card or paying off collections, go for the credit card or loan first.


6. Using a debit card

Debit cards look and act like credit cards, but with one major difference. Because you’re using your personal money, not borrowing money from a creditor, banks don’t report your debit card usage to the credit bureaus. This means no bank related activity, including use of your debit card, overdrafts, withdrawals and deposits has any bearing on your credit score. Now, using your debit card instead of a credit card can help you avoid missing payments, and it can keep your spending in check, which can result in a better credit score in the long run. Just know that your actual banking activity isn’t being reported to the credit bureaus.

Parking ticket on car window

Make sure to pay these three things off since they could end up in collections:


1. Library fines

2. Parking tickets

3. Tax liens


It would be a shame to ruin an excellent credit score because you forgot to return the entire The Hunger Games trilogy to your local library. Pay your library fines, parking tickets and tax liens on time, or risk having them sent to collections and negatively impacting your credit score.

Parking ticket on car window

5 reasons you need a credit repair specialist

There are some simple DIY approaches to credit repair, but sometimes it’s not enough. That’s where a credit repair specialist can step in. A credit repair specialist will help you navigate the world of credit scoring and come up with an action plan for you to raise your credit score within a reasonable amount of time.

Here are five common scenarios that can negatively impact your credit score:


1. You can’t get a loan because of your credit score

Unless you have mounds of cash laying around, you’re going to need a loan to cover major purchases like a vehicle or a house. These items are generally things you need sooner rather than later, so a rejection can leave you feeling hopeless and overwhelmed as you face the limited options available to you without the help of financing.

If your loan application has been denied because of your low credit score, it’s time to see a credit repair specialist who can walk you through your credit report and help you figure out the fastest ways for you to raise your credit score so you can get a loan and get that vehicle or home.


2. You can’t make monthly payments

It’s one thing to have manageable debt, meaning you can make all of your monthly debt payments and still have enough left over for necessities like groceries, clothes and some entertainment. If you find yourself struggling to make even them minimum payments every month, and/or you can make the minimum payments but don’t have enough left over for everything else you need in life, it’s time to see a credit repair specialist.


3. You’re an identity theft victim

If your identity has been stolen and used to open fraudulent accounts, including credit cards, loans and mortgages, you absolutely need to see a credit repair specialist. There are a lot of variables involved in refuting fraudulent charges and getting them taken off your credit report. In the meantime, you’ll need to work on improving your credit score so your identity theft doesn’t keep you from getting the financing and credit you need in your personal life.


4. You’re going through, or have just finalized, a divorce

There’s no getting around it; divorces are messy, even when they run smoothly. It’s easy to miss a few payments, especially when you’re busy transitioning from one household to two. One thing many couples don’t realize is that you are still responsible for bills you signed on to jointly, even if only one of you has agreed to be responsible for them. So if you and your ex-spouse have a joint credit card, and your ex-spouse has agreed to take on payments for that card, you are still on the hook if they don’t pay it on time, which could lower your credit score.

The same goes for any other loans, including car loans and mortgages. The divorce decree does not extend to lenders, who will report your account to the credit reporting agencies as long as your name is on it.

Seeing a credit repair specialist before you have credit problems is the best thing you can do when you’re going through a divorce. A specialist can help you figure out the best way to separate your accounts and payments with minimal impact on your credit. If you’ve already encountered a situation where your credit score has dropped as the result of your divorce, you should seek credit repair counseling immediately to start addressing the problem before it gets worse.


5. Your credit card debt is overwhelming

If you have debt, you aren’t alone. A 2015 report published by The Pew Charitable Trusts found that eight out of 10 Americans have at least some debt. The most common type of debt is a mortgage, followed by credit card debt, auto loans and student loans.

Credit card debt is seen as embarrassing or even shameful for many adults since it is more avoidable than a mortgage or car loan. However, credit card debt is pretty common. According to data collected by the Federal Reserve at the end of 2015, Americans between the ages of 18 and 65 have an average of $4,717 of credit card debt. Only 35 percent of Americans don’t carry a balance on their credit cards, meaning they pay the full amount off every month.

If you aren’t one of the lucky 35 percent but you have an action plan in place to pay off your credit card debt, and it’s working, then you probably don’t need to see a specialist. If, however, you have overwhelming credit card debt that’s interfering with your everyday life, then you will benefit from seeing someone who can help you consolidate your credit cards so you can pay them off and raise your credit score.

Brunette woman holding credit card


There’s no question having a low credit score can negatively impact your life, but the good news is there are plenty of things you can do to raise it. You aren’t doomed to be a subprime borrower forever just because you currently have a score in the 500s. Start by getting a free copy of your credit report from one of the major reporting bureaus, and figure out the main causes for your low score. From there, take action, whether by paying your bills on time, increasing your credit limit, notifying the reporting bureau of mistakes on your credit report or seeking help from a credit repair specialist. You’ll slowly but surely find your credit score climbing, which will help you when you need to make major purchases and apply for credit down the road.

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by Kate Williams, Ph.D. ConsumerAffairs Research Team

As a member of the ConsumerAffairs Research Team, Kate Williams, Ph.D. believes everyone deserves easy access to accurate and comprehensive information on products and businesses before they make a purchase. She spends countless hours researching companies and industries before writing buyers guides to make sure consumers have all the information they need to make smart, informed buying decisions.