How to Fix a Really Bad Credit Score

According to myFICO, your credit score is composed of five factors: payment history (35 percent), the amounts that you currently owe (30 percent), how much new credit you have or have recently applied for (10 percent), the kinds of credit you have (10 percent), and how long your credit history is (35 percent). These factors can have different importances in your score, depending on your personal situation. The lower your credit score, the fewer credit offers you will have and the higher interest you will pay. Credit scores of less than 680 are considered sub-prime, and they mean higher interest rates for borrowers. Whatever your score, if you can raise it, you will probably be able to get credit on better terms.

Instructions

1

Go to AnnualCreditReport.com (see Resources section) to get a free credit report from the three major credit reporting bureaus. You are eligible for a free report from each of the three once a year.

2

Check the reports for negative information, such as payments missed. If you see errors in the report, follow the instructions to report them to the bureaus and get them corrected.

3

Pay your bills on time. If you keep accounts current, over time this will raise your score.

4

Pay off whatever balances you can, and spread your credit debt across several accounts if possible. The less percentage of your total credit availability that you use, the better your score will be. You also can improve your score by having several accounts at 25 percent of the credit limit, rather than one account at 75 percent and two idle accounts.

5

Keep balances on your credit account down, and keep unused accounts open. The unused credit can help your score. In addition, older credit accounts increase the longevity of your credit even if you are not using the card, so they are worth keeping open.

6

Refrain from applying for new credit, which can put a dent in your score.

7

Seek a dialogue with your creditors if you are having trouble keeping up. Often they can work with you to make an arrangement that will help you avoid missing payments and will help you keep up with balances.

8

Try working with an online credit calculator, available from bureaus that help you track your credit. Although the algorithms that determine you score are proprietary, a credit calculator can give you an idea of how much various actions would alter you score.

9

Find a lender that works with rapid rescoring if you need a small credit score bump in a hurry--for instance, if you are applying for a mortgage. There are fees for this service, but it can register payments and improvements in your credit almost immediately, which could put your credit score over the threshold for a lower interest rate.