How to Raise Credit Score and Fix Bad Credit

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Regardless of your financial situation, your credit score is an essential aspect of your finances. This is especially true if you’re planning to borrow money for any reason. With a better credit score, you could qualify for lower interest rates when you borrow, e.g., home mortgage, car loan, and other types of loans. As such, it’s a good idea to do what you can to improve your credit score.

If you don’t know your score yet, you can get your credit score for free. It only takes a few minutes to sign up and find out.

How Your Credit Score is Determined

Before you can improve your credit score, you should have a basic understanding of how credit bureaus calculate your credit score. According to myFICO™, five key factors influence your score.

How to Raise Credit Score and Fix Bad Credit 2



Payment History. Do you repay your debt on time? Late payments, collections, and bankruptcy are also included here.35%
Credit Utilization. How much money do you owe compared to your credit line?30%
Length of Credit History. How long is your track record? How old is your first credit card?15%
Credit Mix. Do you have different types of loans — e.g., mortgage, car loan, business loan, revolving credit, etc.10%
New Credit. Do you have a lot of applications for credit recently?10%

How to Improve Your Credit Score

#1 – Check Your Credit Reports for Errors

The first step in this process will be to pull your own credit report and check what is being reported. This will tell you whether you need to make some improvements or fix some errors. If there are negative reporting errors, having these taken care of will increase your credit score.

Remember, there are three major credit reporting agencies, and each has their own credit report. You can get one free report from each agency per year through AnnualCreditReport.com. Review your reports carefully. If you see any reporting error, contact the credit bureau to dispute the line item and ask them to correct the mistake.

#2 – Payment History

The general rule of thumb here is to make sure you can afford the payments before you take on new debt and to make all payments on time.

  • Catch up on your late payments. If you already have a late payment on your report, try to catch up on those late payments. You might have to cut some expenses and look for extra income to make this happens. Also, you can try to save a few dollars by calling the creditor to see if they will waive the late fee if you catch up.
  • Clean up accounts in collection. If you have any delinquent account in collection, you need to contact the creditor and clean this up the same way you clean up late payments. Unfortunately, a collection account will stay on your report for seven years after it is resolved.
  • Pay all your bills on time. The easiest way to never pay late is to pay as soon as you get the statement or set up automatic bill payments.
  • Avoid collections. Before adding new debt, make sure you are capable of making your payments. If you need to cut expenses to make your debt payments, then you have to do it.
  • Avoid bankruptcy, foreclosure, and short sale. These derogatory items stay on your credit report for 7 to 10 years.
  • Protect yourself with insurance policies. Make sure you’re adequately insured for health, dental, home, and auto insurance to avoid incidents that could cause financial hardship. Common insurable incidents should not make you unable to pay your bills and debt obligations.
  • Set up an Emergency Fund. Make sure you have an emergency fund to help you through rough financial times. Experts recommend a fully-funded emergency fund that has enough money to cover 3-6 months of living expenses.

#3 – Credit Utilization

Pay down your debt is by far the best way to improve your credit and overall finances. Try to pay more than just the minimum to get out of debt as fast as you can. If you can bring your percentage of debt to less than 10% of your available credit, you will ensure the best possible credit score. Ideally, the only thing that you should owe is your home mortgage and nothing else.


  • Do not max out any of your credit cards.
  • Do not get store credit cards which often offer low credit limits — sometimes equal to your purchase amount, which automatically gives you a 100% utilization rate for that card.
  • Ask your credit card issuers for a higher credit limit. This is a hack to give you a short-term boost to your credit and not a long-term solution.

#4 – Length of Credit History

Keep your old credit cards around! Your history with credit cards is extremely valuable, and the longer your history, the better your credit score will be. If you are looking to raise your credit score, it is best to keep these accounts open even after you paid it off. Only close the accounts that charge you an annual fee.

Another reason to keep your accounts open is to maintain your line of credit and keep the overall credit utilization low. When you close your account, your credit score gets hit twice — so be careful!

#5 – Credit Mix

There’s no sense in getting into debt to improve your credit mix, but having a variety of debts can increase your credit score.

#6 – New Credit

  • Open new credit accounts only as needed. Don’t open accounts just to have them around. Make sure each account has a purpose. For example, there is really no good reason to have more than 2-3 credit card accounts.
  • Avoid Credit Inquiries. Understand the difference between a soft pull and hard pull. Each time a bank or credit lender does a hard pull, it leaves a mark on your credit report. Too many inquiries in a short period of time could indicate a financial problem, and that will affect your credit score. If you are hoping to take out a mortgage in the next few months, do not open any new credit cards or other loans.

#7 – Bonus Tips

In addition to the ideas above, you can also try some of these ideas:

  • Rate shop within 30 days. When shopping for the best car loan rate or mortgage rate, do all your rate shopping in 30 days. Each inquiry will show on the credit report, but all the inquiries only count against you once.
  • Ask your creditor for help. If you have been a good customer but have one or two late payments on your record, it might be worth the time to contact that creditor and ask them to review your account and remove what is reporting as negative. If you happen to have a balance on that account at the time, it may help your case.
  • Use the Bureaus’ Online Dispute Process. Some people have said that they get quicker results this way, but make sure you still get printouts of everything you are doing.
  • Try to get Bureaus to add Positive Accounts – Your credit reports do not have all of your accounts. For example,
  • Use Credit Builder Loans. Credit builder loans allow you to borrow a relatively small sum of money, e.g., $500 to $1,000. Unlike a typical loan, you make your “loan payments” to the lender first, the lender then gives you the money once you paid your loan in full. These payments appear on your credit report and help increase your credit score.
  • Secure Credit Cards. You get a line of credit from a secured credit card, which is guaranteed by your bank account, such as certificates of deposit or savings account. The balance in your bank account is the credit limit. As you use your card, the payments become part of your payment history and can raise your scores.

Bottom Line

It is imperative to remember that the most important thing you can do to maintain a high credit score is to pay your bills on time, every month. Nothing will decrease your score faster than missing payments.

You need to note that it takes time for your credit score to improve, so please be patient. Increasing your score is possible within just a couple of months by following these steps.

Do you know another credit score improvement tip? Please share yours here.

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14 years ago

After recently reading I Will Teach You to be Rich I used one of his techniques to hopefully raise my FICO score. I have no CC debt and pay on time every month and called up and asked them to raise my credit limit. I have no need for the raised limit other than it betters my ratio and could help my score a bit.

14 years ago

Very solid tips! The only things I will add is to have both diligence and patience. It can take some time to see your score change, and how quickly and how much your score changes depends on many factors.

14 years ago

Uh… While I agree that a good credit score is better than a bad credit score, the only thing a good credit score means is that you like debt and are successful at managing lots of it. So I disagree with the opening sentence. I don’t feel my credit score is an important part of my finances. I’ve put financially sound principles into my life over the past years and was able to pay cash for my last car. My goal is in 3-5 years have my mortgage (my last debt remaining) paid off at which point all future house… Read more »

14 years ago

Solid advice, but there is a great deal of time and patience involved in improving scores . . .

14 years ago

Knowing about the various constituents that constitute your credit score makes credit score repair an easier process.

beryl maureen hammond
beryl maureen hammond
14 years ago

knowing how your credit score is determined makes it easier to improve your score.

Charles Baratta
Charles Baratta
13 years ago

This really can be an issue with a small business owner attempting to obtain an sba, or traditional small business bank loan for working capital to grow or finance their business. In these times many merchants we talk to, have beaten up their personal credit pretty badly, hence low fico scores. However, as a merchant business cash advance funding group, we are able to get businesses the money they need, to stay in business. There are some great tips videos on my blog.

Mayank Gupta
Mayank Gupta
11 years ago

As mentioned, Paying your credit card bill on time also helps in improving credit score fast and utilizing secured loans also helps in improving your credit score

11 years ago

Rebuilding your credit after a disaster can be a long process, but there are a few steps you can take to help increase your score within a couple months. Pay Off Your Credit Cards And Lines Of Credit – This is one of the fastest ways to increase your score and it will also lower your debt utilization ratio, the difference between how much credit you’re using and the credit limits. Paying off debt with another loan would show up on your credit report and could do more damage than good, even if it is for a lower interest rate.… Read more »

Trudy Hooks
Trudy Hooks
11 years ago

I recently received my credit scores which actually weren’t bad but could be better. I noticed that one of the reasons given for not receiving a higher score is that there was a delinquency in the past on something. I can only think of a couple of times when I didn’t pay my Am Ex bill on time. Is that really the reason? In all the years of having that card it seems to me to be such a insignificant default!!! How do I dispute such a demerit on my credit history?

How to Raise Credit Score and Fix Bad Credit

by Pinyo Bhulipongsanon time to read: 6 min
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