Rebuilding credit is a journey that requires patience and strategy. There are no quick fixes: it’s a marathon, not a sprint. The strategies we’ll explore are not instant solutions but effective, legal methods to rebuild damaged credit.

Beware of any claims promising to remove legitimate entries from your credit report or achieve fast, dramatic improvements in your credit score. These are often signs of a credit repair scam.

There are three stages to repairing credit: understanding your credit report, dealing with (and possibly correcting) negative entries that are already on your report, and forming a new, positive credit record to improve your score.

Let’s break that down into eight actionable steps.

1. Understand Your Credit Report

Start by pulling your most recent credit report. All consumers can request one free report every year from each of the three major credit reporting bureaus: Experian, Equifax, and TransUnion.

For more information on free credit reports, see our guide on where to get your free credit report.

Not all creditors report to all three bureaus, so your credit reports may be slightly different. You can get all three simultaneously, but many people prefer to get one every four months, which allows you to monitor your credit at regular intervals throughout the year.

It’s critical to review all of the information reported. There’s a lot of information packed into them and no small amount of financial jargon. So before you start, it might be a good idea to familiarize yourself with how to read a credit report. Some of it may surprise you, and you may have forgotten some of the entries. You may also find mistakes in your credit reports.

You may be terrified of what you’ll see on your credit report. Many people are. Don’t let the fear stop you from taking control. Credit reports can be ugly, but they can also be improved.

☝️ You can’t rebuild damaged credit if you don’t understand the damage. Knowing what’s on your report is the first step toward dealing with your score head-on.

2. Fix Any Errors

One of the fastest ways to improve your score is to correct errors on your credit reports. Over a third of all credit reports contain errors, most of them being related to their personal and account information.

There’s a wide range of possible mistakes. The discrepancy could be:

  • The wrong name, address or phone number.
  • Accounts on your profile that don’t belong to you.
  • Incorrect debt information.
  • Wrong balance information or credit limit reported.
  • More than one listing for the same debt.
  • Discrepancies in late payment information.
  • An account is listed as closed, when it’s open, or vice versa.
  • Other incorrect information.

In other words, there is a lot of room for error on your credit report, and these errors can do real damage to your score.

If you notice any discrepancies, look on your credit report for instructions on how to report them. You can submit disputes online or through the mail, but it is your responsibility to call attention to mistakes. If you don’t, they will go unnoticed.

☝️ You do not have to pay anyone or get help to report a mistake on your credit report. You can learn how to dispute a credit report entry and do it yourself. The credit bureaus are required by law to investigate any error you report and inform you of the outcome.

3. Check Your Negative Entries

Unpaid debts and accounts that have been sent to collection agencies can do serious damage to your credit score. You cannot remove a legitimate negative entry from your credit report, but you may be able to reduce the impact these accounts have on your credit. Here are some things to try.

  • Pay or settle your debt. If you pay your debt or reach a debt settlement, the entry will still be on your credit report. Closed accounts have less impact on your credit than open ones and some newer scoring models downgrade the impact of paid and settled collection accounts.
  • Ask for a goodwill deletion. If you have a single negative entry with an otherwise good credit record, or if your record with a creditor was previously good, you can ask the creditor to delete the entry. They may not agree to do it, but it can’t hurt to ask.
  • Pay for delete. Some collection agencies will accept a pay for delete agreement, meaning that they will delete a record in exchange for a payment. You’ll need to get an agreement in writing.

These methods may not be able to remove all records of an account from your record, but they may be able to reduce its impact.

☝️ Older entries on your credit report have less impact on your credit score than newer entries, so as time goes by those old black marks will do less and less damage.

Once you’ve done all you can to resolve your credit report issues, it’s time to build up a positive record to offset the history that damaged your score.

4.  Pay Your Bills on Time

Debt can hurt your credit score, but it can also help your credit score. The single most important component of your credit score is payment history: your record of paying debts and bills on time.

Making payments late or missing payments harms your credit score. Making payments on time helps your credit score. It may be a struggle, but making every payment on time will help you get out of debt and is the single most important thing you can do to boost your credit.

📘 If you’re having trouble keeping up with your payments and you’re not sure what to do about it, you can try some of these methods of getting out of debt.

5. Watch Your Credit Utilization

Credit utilization is the percentage of your available credit that you are actually using. It is a major factor in calculating your score: it’s worth about 30% of your credit score in some scoring models[2]. You can improve your credit utilization by using less than 30% of your credit limit on all credit cards. If you can use less it will help more.

👉 For example:

👉 If you have $9,000 in available credit from your credit cards and your balance is $2500, your credit utilization is 28%, which is acceptable.

👉 If your balance is $3500, your credit utilization is 39%, which could drag your score down.

Keeping credit card balances low helps you in more than one way. If your balance is low you are more likely to pay it off in full on or before the due date. That means less money going to interest payments and more money in your pocket.

Quickly determine your credit utilization ratio using the calculator below:

Go to the full page to view and use the calculator.

6. Use Credit Wisely

You need to use credit to build credit. If you’re recovering from bankruptcy or completing a debt management plan, you may have closed credit accounts, and you may not qualify for new ones. If you’re in that position, consider these alternatives:

  • Use a secured credit card. A secured credit card is issued to you with a credit line that is equal to the amount you pay in a security deposit. For instance, if you secure a credit card with $500, then your credit line will remain at $500. Keep your balance below 30% of that, pay it off in full every month, and you’ll be building a positive credit history.
  • Use a credit builder loan. Many banks and credit unions offer credit builder loans. The lender holds the loan proceeds in an account, you make the payments, and you get the lump sum when the payments are complete. Your credit report will show an installment loan. Lenders take minimal risk so they are willing to lend to people with impaired credit.

These alternatives will provide you with credit accounts that will be reflected on your credit report. Make every payment on time and you’ll build up a positive payment history.

☝️ Remember that your credit mix affects your score. Keeping both revolving accounts (like credit cards) and installment accounts (like a student loan, car loan, or credit builder loan) open will improve your credit mix.

7. Manage Your Accounts

You will want to avoid closing old accounts and opening too many new accounts. You might think closing an account would look better on your credit profile, but the opposite is true. Closing an account will reduce your number of open accounts and could shorten the average age of your open accounts. Closing an account will also lower your total credit limit, which raises your credit utilization.

👉 For example:

Imagine that you have 3 credit card accounts. Each has a credit limit of $3000, so your total combined credit limit is $9000.

👉 You have a balance of $1500 on one card, $1000 on another, and zero on the third.

👉 Your total balance is $2500, so your credit utilization will be 28.8%.

👉 If you close the account with no balance, your total combined credit limit will be $6000 and your credit utilization will be 41.7%, even though your balance hasn’t changed.

Opening new accounts can also affect your score. Each time you open an account a hard inquiry is recorded on your profile. The impact of one hard inquiry is minimal, but if those inquiries add up it looks like you’re desperate for credit, and that can hit your score.

8. Use Credit-Boosting Services

Many of the bills you pay are not normally reported to the credit bureaus, so they do not help your credit. Several services are emerging that close this gap. 

Experian offers the Experian BOOST™ program, which synchronizes with your bank account and reports your on-time utility and mobile phone payments. If you have a positive payment history, your credit score may improve.

Experian BOOST™ is specifically for utility and cell phone payments, but there is a similar program for regular rent payments. If your property manager participates in the Experian RentBureau program, you receive credit for rent payments.

❗️ Experian’s programs only affect your Experian credit report.

TransUnion offers a similar credit-boosting program called eCredAble Lift, giving you the ability to affect another one of your credit reports. 

Grow Credit places streaming service bills on your credit report.

If you rent your house or apartment, you can get a big credit score boost by reporting your rent. Companies like Boom and Rent Reporters will report your rent to the credit bureaus.

We’ve reviewed 12 of the best rent reporting services, and if you’re considering rent reporting the review is a great place to start.

How Long Do Negative Items Stay on Your Credit Report

The process of rebuilding credit can feel unbearably slow, but time eventually works in your favor. Negative entries on your credit report drop off within specific time frames. Here is a snapshot of how long negative marks stay on your profile:

  • Late payments are reported for seven years from the first missed payment.
  • Public record items also remain on your report for seven years.
  • Bankruptcies are on your report for 7 to 10 years.
  • Hard Inquiries remain for up to two years.

In each case the impact of the entry on your credit score will decline as the entry ages.

To summarize, rebuilding credit requires several steps.

  • You’ll need to understand your credit reports and the way that your credit score is generated.
  • You’ll need to spot and dispute any inaccuracies and discrepancies and do what you can to resolve negative accounts.
  • You’ll need to follow up by making positive changes going forward, managing your finances in a way that boosts your credit score.

These strategies will slowly but surely improve your score. You’re also likely to find that you’re improving the overall state of your finances. That combination of benefits is worth the time and effort!

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