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How to Fix a Bad Credit Score

Real talk: There’s no “fast” or instant way to repair a bad credit score, no matter what a clickbait headline tells you. Your credit score is a reflection of financial habits that are months, years, or decades in the making — rehabilitation won’t happen overnight.

The good news: With a little bit of conscious effort, it’s fairly easy to improve your score and set yourself on track toward long-term financial health.

If you haven’t already, start by checking your free credit score and ordering a copy of your credit report (you can get one free report per year through Equifax or TransUnion) so you know where you stand. With your entire credit history at your fingertips, it’s time to get to work.

1. Identify your weak spots

It’s a clichéd quote frequently attributed to Albert Einstein on dorm room posters, but it’s true: the definition of insanity is doing the same thing over and over and expecting different results. Break the cycle by pinpointing exactly why you have bad credit. Your follies are likely chronic: overspending (not following a budget, living paycheque to paycheque), carrying a lot of credit card debt, and/or ignoring bill due dates or missing payments. Any “derogatory marks” on your credit report will especially hurt your score: bankruptcy, liens, or unpaid bills that have moved to collections. Be sure to scan your credit report for mistakes — if you find any, start the dispute process with the credit bureaus ASAP.

2. Pay your bills on time

Take a look at your credit report: How many late payments are listed on your record? At 35%, payment history is the largest component of how your credit score is calculated. Paying all of your bills on time, every time is the single easiest way to repair and maintain a high credit score, yet it’s like hand washing: it’s technically mandatory, and everyone says they do it, but here we are.

If you’re struggling with overspending, it’s time to set up a budget and track it using an app such as Mint, which keeps you honest by cataloging every single purchase and trip to the ATM. If you’ve been hit with financial hardship, contact your creditor as soon as you foresee being unable to meet your obligations. Lenders want you to pay them back, so they’re often willing to work with you, as long as you tell them before you’re deep in the hole.

If you’re just disorganized or forgetful, this is the easiest thing to fix: Set up payment reminders through your chosen budgeting app, your email/phone calendar, or make a list and tack it to your fridge — whatever it takes.

3. Get in control of your debt

The credit bureaus consider it healthy to have a mix of different types of credit, as long as you’re in control of it. Even if you have a $200,000 mortgage, it’s actually considered “good” debt as long as you’re making your payments on time (missing a mortgage payment, on the other hand, can knock up to 100 points off your score). Credit card debt is different — carrying high balances on multiple credit cards signals to the credit bureaus that you’re not in control of your finances, especially if you can’t afford to at least make the monthly minimum payments.

Ideally, if you’re not paying your balances off in full each month, your credit utilization ratio should be below 30% of your available limit. So if the limit on your credit card is $5,000, keep your balance below $1,500 at any given time. It’s also better to have $5,000 in debt spread across three credit cards than to have one maxed-out card.

4. Keep an eye on your progress

Remember, change is incremental. It will take at least 30 to 60 days for changes to begin appearing on your credit report, and several months for your score to begin ticking upward, depending on the severity of your past transgressions. It can take up to seven years for derogatory items to fall off your report, but the effect they have on your credit score is diminished with time. Credit scores are calculated on a scale from 300 to 900. Note that it’s not so much the exact number of points gained that matter, but what “range” you fall under: Very poor, poor, fair, good, or excellent. As your improved habits take hold, your score will go up.

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