Defeating the 3-Digit Downer: 7 Steps for Beating the Bad Credit Blues

how to raise a bad credit scoreYour credit score gives you more headaches than 1,000 screaming 2-year-olds (that’s up for debate). But, what can you do about it? You need to have a good credit score to buy the things you want and need in life. Sometimes, it’s inevitable. For example, most people cannot buy a home or a car without a loan. Beyond loans, credit scores can have impact with your employment and insurance rates.  A good credit score has far reaching effects on your financial life.  If your struggling right now, here’s how to get the credit you need.

Start Checking Your Credit Report

The first thing you can do to improve your credit is to have a look at what others are saying about you. No, you don’t need to go around asking everyone whether they would lend you money. Fortunately, your credit history and trustworthiness are codified in a report called your credit report.

Accessing your credit report and score is pretty easy, actually. Just visit and sign up for a free account. You’ll get one free credit report per year. This will usually be all that you need, but you can also buy additional reports and services from the site.

While there are many websites out there promising to give you access to your credit reports, is the only one sponsored by the three major credit bureaus, Equifax, Experian, and TransUnion.

Check For Errors

It’s not uncommon for people to have mistakes on their credit reports. Unfortunately, many bill collectors, banks, financial institutions and other creditors make mistakes or sometimes maliciously report false information hoping that you won’t notice.

Of course, many times, it’s also a simple mistake made by the creditor. Either way, you need to get any errors fixed. So, what kind of errors can show up on a credit report? Things like how payments were made, whether they were made on time or late, and even the type of loans taken out can all be mixed up and reported erroneously.

According to Right Direction Financial, many people with bad credit are turned down simply based on their credit report and score – most corporate lenders don’t take into consideration who you are or what you do for a living. They don’t care about you as a person, just what your credit report says. So, making sure that there are no errors on your report is extremely important, especially if you want a new car or home loan.

Related: Check your credit score with MyFICO, the only place to get your true credit score used by 90% of financial institutions.

Stay On Top Of Your Monthly Payments

If you’re behind on any payments, you need to catch up. Most lenders look back 6 months to see that you’re current on loan payments and other debts. Don’t think that a late utility payment won’t be reported either. Some companies do report them, especially if you’re behind 3 months or more.  Remember, your payment history makes up 35% of your FICO credit score. That’s a large percentage to say the least.  You need to be diligent.

Don’t Add More Debt Just Yet

Don’t take on additional debt. When building up your credit, the worst thing you can do is go further into debt. Yes, at some point, you’ll be taking on additional loans. But, for right now, you don’t want additional debt. You want as little debt as possible. No debt would be ideal, but you should be making an effort to pay down as much as you can.  The amount you owe on credit makes up 30% of your FICO score.  It’s the second largest percentage behind payment history.

Pay Bills Early

Paying your bills early is actually better than paying on time – it gets you in the habit of thinking ahead instead of playing catch up with your debts and regular bills.  On-time payments plays a great deal into your credit score, so paying them early will only help you over the long run and create an excellent habit.

Don’t Apply For New Credit

Credit inquiries can actually hurt your credit. So, during the credit repair process, do not apply for any new loans or lines of credit.  Also, make sure you check before signing any leases or anything which will put a hard pull on your credit report.  New credit accounts for 10% of your FICO credit score. You need to be very careful on what you sign up for or add to your credit profile.

Start Saving

Last, but definitely not least, you should be saving money – a lot of it. Even when a loan does not require a down payment, many lenders will appreciate the offer and will sometimes offer you a lower interest rate if you can put any money down.

A generous 10 or 20 percent down is typically for a rate reduction. It also inspires confidence in the lender that you can repay the loan. Why? Because lenders know that people who regularly save money are more inclined and able to repay their debts. In general, savers are more financially responsible.  You will need at least 20% down when you buy a home in order to get rid of private mortgage insurance (PMI)!

To start saving, you’ll obviously need more income than expenses, but you can start by saving at least 10 percent of your take-home pay. Bump that up to 20 percent when you can.

Keep going until you hit 40 percent of your income. At that point, you’re going to start ingraining new financial habits – notably, you will become a net saver instead of a net spender. Even though you’re still spending 60 percent of your income, you can keep pushing that up until you tip 50 percent.

Is it difficult? You bet it is. But, it’s also necessary. This is what will help you reduce your reliance on loans and other types of credit while at the same time helping you learn the financial responsibility to take on debt when you need to.


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Author Bio: Elsie Scarberry has had to fight her way out of serious debt. An avid blogger, she enjoys sharing her life challenges and their solutions with others online. You can find her helpful articles on a variety of websites and blogs.

About the Author Grayson Bell

I'm a business owner, blogger, father, and husband. I used credit cards too much and found myself in over $75,000 in debt ($50,000 in just credit cards). I paid it off, started this blog, and my financial life has changed. I now talk about fighting debt and growing wealth here. I run a WordPress support company, along with another blog, Eyes on the Dollar, which is another great personal finance blog.

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Leave a Comment:

Steven A. Branson says January 23

Good collection of ideas in one place. However, what if the debt burden is too great to allow for any savings, even after trimming expenses? This can happen with the change in circumstances, such as divorce or periods of bad health. Are debt consolidation/work out and bankruptcy the only routes left? – Steven @Millennials_Mny

    Grayson Bell
    Grayson Bell says January 23

    I would recommend counseling first before going to any bankruptcy route. If that doesn’t work, then going with a non-profit debt consolidation agency might help.

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