Credit Repair: Best Ways to Fix Your Credit Score in 2024

Improving your credit score is simple. In general, the most well-known way to improve your credit score is to pay down your balances and start making on-time payments each month. However, if you are purchasing your first home, you may need to raise your credit score quickly, so here are some steps you can take to improve your credit score in six months.

Credit Repair Introduction

Your credit score is a number showing how likely you are to repay any debt you incur.

According to ValuePenguin, the average American has a credit score of 695 in 2019. Considering any score from 660 to 719 is “average/fair,” and scores between 720 and 850 are “good/excellent,”. Fast forward to 2022, The average FICO Score in the U.S. was 714 , unchanged from 2021.

Credit repair involves improving one’s credit score in a variety of ways. However, the most common form of credit repair refers to disputing credit report errors.

We’ll be taking a look at them all in this definitive guide.

1. Figure Out Where You Stand

Equifax, Experian, and TransUnion are the 3 main credit bureaus responsible for creating credit reports. VantageScore and FICO are the 2 biggest credit scoring models that calculate your score based on these reports.

As mentioned above, any score above 660 is average/fair to good/excellent. 620 to 659 is described as “poor,” and anything from 300 to 619 is “bad.”

Even if you’re between 660 and 719, you may want to look at improving your credit score – and especially if you’re below 660.

Here are a few platforms to help you figure out where you stand.

AnnualCreditReport.com

AnnualCreditReport.com is one of the best, most secure means of getting updated credit reports from Equifax, Experian, and TransUnion.

All you need to do is fill out an online form stating how many of the above bureau’s free annual credit reports you want. AnnualCreditReport.com then puts the request in on your behalf.

While the screening questions you’ll be asked next are rather hard, they’re deliberately so. It’s another security measure by AnnualCreditReport.com to ensure that you – and only you – are able to access your credit reports.

Credit Karma

AnnualCreditReport.com only supplies your credit report, so in order to get your credit score, head over to Credit Karma.

Credit Karma allows you to check your credit score for free, as many times as you’d like. You can also elect to get free weekly updates on your credit reports if you so choose, as well as quality recommendations on ways to improve your spending and credit score.

If you choose to purchase one of these recommendations, those companies pay Credit Karma an affiliation/referral fee. That’s how Credit Karma is able to provide their services at no cost to you.

Credit Sesame

A great alternative to Credit Karma is Credit Sesame.

Similar to Credit Karma, you can use Credit Sesame to receive regular updates on your credit reports as well as your credit score.

By becoming a member for free, you’ll also gain access to their personal credit management program. This allows you to enjoy free credit monitoring, insights on what is affecting and what can affect your credit, and personalized recommendations on how to improve your credit score.

All you need is your email address to sign up. Additionally, there are a host of other benefits to help you with your credit repair via Credit Sesame as well.

2. If You Find Errors, Dispute Them

Mistakes do happen – after all, “to err is to be human.”

But mistakes can be costly, especially when it comes to your credit reports. In fact, in a 2012 study by the Federal Trade Commission, 26% of the participants found one or more errors in their credit reports that negatively affected their credit scores. From a lender’s perspective, this makes them look riskier than they actually are.

Common Errors to Look Out For

Here are some of the most common errors to look out for when reviewing your credit reports:

• Inconsistent use of name (Daniel, Dan, Danny Smith) leading to your report including another person’s credit information.
• Missing information (not all creditors send pertinent information to the credit bureaus voluntarily).
• Clerical errors due to incorrect data entry from handwritten documents.
• Multiple instances of a single line of credit.
• Closed credit accounts not reflecting as closed by the creditor.
• Former spouse’s debts included in your report.
• Older bad debts not yet removed from your report after 7 years.
• Mysterious accounts and debts (could be a sign of identity theft).

Fixing Credit Score Errors

In order to get the errors on your credit report fixed, you’ll need to contact the relevant credit bureau (or bureaus), as well as the credit companies that supplied the incorrect information.

To do so, open a dispute on the relevant credit bureau’s website. Here is some relevant information you’ll need to include:

• Full name and address
• Clearly identify all disputed items
• An explanation as to why you’re disputing the information
• Copies of supporting documents
• A request for deletion or correction

Next, send the same information to the appropriate credit company or companies. If sending via mail, include a copy of your credit report and use certified mail.

Information to Bear in Mind

Under the Fair Credit Reporting Act, it’s the credit company and credit bureau’s responsibility to correct any and all incomplete or otherwise inaccurate data. It can take 30 days for credit bureaus to investigate your dispute. The only reason they won’t complete their investigation in this time is if they dismiss your dispute as fickle.

This is why it’s important to include certified copies (not originals) of supporting documents when you open your dispute.

If a credit company again provides a bureau with the same information you’ve disputed, they have to include notification of your dispute. You should also request that they copy you on any such correspondence.

Many states allow you to receive a free, updated credit report directly from the relevant credit bureau to verify whether the disputed information has been updated.

Further Rights Under the Fair Credit Reporting Act

In addition to your right to have the credit bureau and credit company correct inaccurate information on your credit reports, you also have the following rights:

• Request the names of anyone who has received your credit report within the last year (up to 2 years if for employment purposes).
• If your credit application has been denied due to information on your credit report, the company must inform you of the relevant credit bureau where they received the report.
• Provided you request a copy of your report within 60 days of a credit application being denied, the bureau is required to send you one for free.
• If a dispute is not resolved to your satisfaction, you may add a summary explanation to your report and/or take legal action.

3. Stop the Bleeding

One of the most important steps in repairing your credit score is to identify the reasons for it being less than ideal.

If you’ve reviewed your latest credit report and found it to be without inaccuracy, or it’s been updated following a dispute, then there are a few other things to look out for. Things like late payments (past and present), debt, too many credit accounts, and poor budgeting are common culprits.

Once you’ve identified the cause or causes of your poor credit rating, it’s time to fix them. After all, if you don’t stop the bleeding, you’ll run out completely.

Pay All of Your Bills on Time

Here’s a quick summary of how different kinds of late payments affect your credit score:

• 30-60 days late: recent late payments will only temporarily decrease your credit score, especially if infrequent. Frequent late payment affects your credit score for longer.
• 90 days late: even one payment made 90 days late will significantly drop your score for as long as 7 years.
• 120+ days late: while payments more than 90 days late don’t directly affect your score further, they do so indirectly. By this point, your debt has been written off as a loss, sold to a third-party debt collection agency, or you’ve been repossessed. Your credit report will include this information – and that’s how your score drops even further.

Pay Down Debt (Especially Credit Card Debt)

Credit card debt is one of the worst debts you can have, especially considering their high interest rates.

Previously, paying down your debt wouldn’t affect your credit score very much. Usually, it would actually result in your score dropping, simply because you’d have one less account on your report.

However, with the new VantageScore and FICO models, paying down your debts can help you to improve your score. To do so, you may need to contact the credit bureaus to ensure that your credit report is appropriately updated.

Avoid Applying for Credit

If your credit score is already fairly low, then you should avoid applying for credit until you’ve completed your credit repair. Remember: anything below 720 should be improved, especially if it’s lower than 660.

Having a low score – or credit damage – severely impacts the type of credit you’ll be able to get.

You’ll also be charged higher rates, making it somewhat harder to repay your credit. This can result in a vicious cycle, keeping your credit score low instead of improving it.

Use Mint for Budgeting

It’s best practice to have a budget to begin with, but it becomes especially important when repairing your credit and keeping it above average (or excellent).

If you struggle to set and stick to a budget, you can use Mint.

Simply sign up for free and get started with a budget plan suggested by Mint, based on your income and expenses. There are a host of other great benefits to using Mint. These include updates on any fees being charged, over-spending, and notifications of any suspicious activity on your account.

BONUS: Budget Methodology

One of the best budgeting methods is to use the 20-30-50 ratio.

• 20% goes toward your savings, investments, and paying debts.
• 30% is used for non-essentials like eating-out.
• 50% of your budget is used for essentials like paying your mortgage.

If you’re finding that you have a lot of debt you need to pay, you may need to budget 30% towards that and only 20% for lifestyle non-essentials. Once your debts are in order and you’re able to cover them with less than 20% of your post-tax income, you can switch back to the standard model above.

4. Pay All Bills on Time Moving Forward

As you saw earlier, late payments affect credit scores severely.

It tells creditors and investors that you’re likely to continue paying your bills and returns late, and/or file insurance claims that can be costly for them. This means that creditors and investors are likely to feel they’ll lose money if they lend you money. Your chances of having credit applications denied increases significantly.

As they say: prevention is better than the cure. Once you’ve started to get your credit score repaired, continue to pay all your bills on time to keep your score as healthy as possible.

Healthy Tips to Help You Pay Your Bills on Time

Paying your bills on time is easily the single most important factor that will help you maintain a healthy credit score.

Even before you get all your debts paid, it helps to foster healthy habits. These will not only ensure that you don’t acquire additional debt while trying to repair your credit, but they’ll also help to keep it that way moving forward.

• Don’t wait for the due date: pay your bills the day they arrive.
• Pay your bills on the same day each month, as far as possible.
• Set up automatic payments online for regular bills. This way, there’s no risk of possibly forgetting a bill.

5. Pay Down Credit Card Balances

As mentioned above, one of the biggest impacts on your credit score will be paying down your credit card balances. By doing this, you’re showing responsibility, along with the ability to pay back what you borrow.

While paying off credit card balances can be challenging – especially if you’re struggling financially – with the right budget, it’s easier than you think. Yet again, Mint is an excellent way to fit paying off credit card balances into your already tight budget. Just remember: once it’s paid off, keep it that way

6. Don’t Apply For New Credit

Again, as mentioned earlier, applying for new credit while trying to repair your credit score can be incredibly counter-productive. Not only are you creating extra risk of being unable to pay back all of the credit you have available, but too much new credit will directly damage your score too.

When calculating your credit score, FICA and VantageScore take a look at any new credit accounts that have been added over the past 6 to 12 months. While one or two won’t impact your score heavily, it does make you look like more of a risk.

Credit score reductions due to new credit accounts are typically short-term.

On the Other Hand…

At the same time, new credit can potentially improve your credit score more than reducing it.

Confusing, right?

This only happens if you’re incredibly smart about new credit accounts, though. For example, if your credit use is sitting at 80% (say, $4,000 balance on an account with a $5,000 limit), you look like a high risk.

But if you then open a new credit account with a $10,000 limit and keep the balance at $0, your utilization ratio drops to 27%. This looks a lot healthier and can result.

Be very careful trying to use this method as part of your credit repair. Unless specifically advised otherwise, stick to the rule of not applying for new credit at all.

Where New Credit Fits In

The following factors are what FICO considers when calculating your score:

• Payment history
• Credit utilization
• Credit length
• New credit (especially how much)
• Types of credit

New Credit Score Factors

FICO also takes a look at the following points to determine how new credit will affect your score:

• Number of new credit accounts opened in the past 6 to 12 months.
• The proportion of new credit accounts, according to account type.
• Number of recent credit inquiries.
• Length of time since new credit accounts were opened, according to account type.
• Length of time since most recent credit inquiries.
• The reappearance of positive credit information on a credit account that previously had bad payment history.

Use Self Lender

Remember how we mentioned that you could potentially improve your credit score with new accounts, but that you should rather forego an attempt to do so?

There is one sure-fire responsible way to use this method.

Self Lender is an online platform that can help you build positive credit without having to open a new credit account.

All you need to do is join via their website and monitor your credit score for free. Apply for a Credit Builder Account, selecting a payment plan that works for you and your budget. At the end of the plan’s duration, you’ll be able to access the savings and enjoy an improved credit score at the same time.

Credit Repair Companies

Credit repair companies won’t do anything for you that you can’t do yourself. The most reputable ones are very upfront about this fact.

However, you still take your car to a mechanic in order to get your car serviced, even though you could learn the necessary skills to do it yourself. In the same way, credit repair companies are simply better at what they do than the average person. Making use of one makes credit repair that much easier for you.

Here are 3 of the best credit repair companies on the market:

• Lexington Law
• Blue Sky Credit
• CreditRepair.com

Credit Score Repair Conclusion

If you’re reading this conclusion, then you’ve made it through our definitive guide on credit repair.

By now, you’ve learned what a credit score is and how it affects your credit standing with various lenders and investors. You also know how to determine what your credit score is and whether or not you need to work on credit repair.

If you’ve found that your credit score is below 660, then we once again recommend using the tips and resources we’ve provided here to repair your credit. Following this guide, you’ll be on the right path to a healthy credit score. Best of all, you’ll be able to keep it that way.