How to fix your bad credit: Our tips
Quick insights
- Improving your credit score can make an impact on the types of financial opportunities you qualify for, including credit card approvals, lower-interest loans and rentals.
- Some credit behaviors, such as missed payments, can negatively impact your score and appear on your credit report
- Consistent and good financial habits can help improve your credit score over time.
If you’ve had trouble being approved for loans, rentals or credit cards, improving your credit score could make a difference. For many lenders, an applicant’s credit score is a first-sight representation of their financial responsibility. A person who struggles to be approved for new lines of credit may feel like they have “bad” credit, although this term does not appear in the official ranges for VantageScore® and FICO® credit scoring models.
In this article, we’ll breakdown the basics of credit score calculations, explain how to access your score and provide possible solutions to fix your "bad” credit.
Understanding your credit score
If you’re just beginning to research how to fix a poor credit score, it can be helpful to familiarize yourself with the two credit scoring models: VantageScore 3.0 and FICO. Both models measure credit on a 350–850 scale, although they have slight differences between how they weigh credit factors and ranges.
The ranges for VantageScore 3.0 are:
- Excellent: 781 to 850
- Good: 661 to 780
- Fair: 601 to 660
- Poor: 500 to 600
- Very poor: 300 to 499
The ranges for FICO are:
- Exceptional: 800+
- Very good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 579 and below
As you can observe, credit score models have scoring ranges that span from poor to exceptional. If your credit score is categorized as poor by certain models, you might perceive this as "bad credit." Although there is no official definition of a "bad" credit score, in this article, the term "bad credit" denotes low credit scores.
The factors affecting your credit score
Your credit score is a representation of your creditworthiness, or your ability to repay debts on time. Viewing your score helps lenders decide if you’re likely to repay a debt in the future. Both credit scoring models include these factors (although they may be weighed slightly differently):
- Payment history: Timely payments are a high-impact factor on credit scoring, and a bad credit history is often heavily weighted. A single missed payment can cause a drop in your credit score and remains on your credit history for years.
- Credit utilization: The portion of available credit you use can impact your score. The “available credit” you have represents your overall approved credit limit. As a rule of thumb, it’s better to use 30% or less of your total available credit.
- Age of accounts: Maintaining open and active accounts in good standing for multiple years positively impacts your score. Someone who is newer to credit, with younger accounts, is considered less creditworthy compared to a person with older accounts.
- Credit mix: A diverse mix of types of credit can be a good indicator of creditworthiness. For example, having a revolving line of credit (like a credit card), a loan and a mortgage.
Strategies to fix a low credit score
If you’re not satisfied with where your credit is at, here are a few steps you can take right away to help improve it.
Prioritize on-time bill payment
On-time payments are an important factor in credit scoring. If you find it difficult to remember to make your payments on a specific day, setting reminders or automating payments may help. However, if you’re struggling to make the payments due to financial strain, it may be time to consider adjusting your budget, consolidating your debt or proactively approaching creditors to discuss your options.
Consider your credit utilization
If you’re consistently using more than 30% of your available credit in a month, you may want to pay your card’s balance down more frequently or use another form of payment that doesn’t rely on credit (such as cash). Improving your credit limit (such as with a limit increase on a current card or a new line of credit) can also help adjust your utilization and help contribute to fixing a poor credit score.
Try the score planner in Chase Credit Journey®
You can monitor your credit with Chase Credit Journey®, a free online tool that lets you access your score anytime, Plus, you don’t need to be a Chase customer to sign up.
Credit Journey allows you to set a goal for your credit score, compare various plans of action and track your results. The score improvement tool provided by Experian makes personalized recommendations based on your current score, which can help take some of the guesswork out of the process. Once you’ve met one goal, you can set a new goal to continue building your score.
Become an authorized user on another’s card
Someone in your life with a strong payment history can choose to add you as an authorized user on their credit card. If the primary cardmember pays the account balance on time, your credit score can be positively impacted. As an authorized user, you don’t have to use the card to gain the credit benefits from the account holder’s timely payments. Keep in mind, the primary cardmember is responsible for making payments, and there may be certain restrictions on how an authorized user can use the card.
How fast can you repair bad credit?
The amount of time it takes to help repair one’s credit depends on a few variables:
- The distance between your current score and your goal: For those whose score is only a few points away from the next-highest scoring range, a small bump may be all it takes to feel a positive impact. For others who are looking to gain several dozen or several hundred points, the road may be longer.
- The types of negative marks weighing down your score: Some factors stay on your credit report longer than others. For example, the impact of a missed payment may stick for years, while hard credit checks and credit utilization may be updated more frequently.
- Your willingness and commitment: Making significant changes may improve your score more quickly. But speed isn’t everything—it's important to consider whether or not big changes will be sustainable.
Maintaining your improved credit score
Once you’ve reached your goal credit score, it's important to keep up the healthy financial habits that helped you achieve it. The growing length of your positive credit history (and the average age of your credit accounts) can continue to increase your score with time. From time to time, errors may appear on your credit report, so it’s important to continue monitoring it. Credit Journey can help you do so with its credit and identity monitoring resources.
In summary
Fixing a “bad” credit score can help you be approved for new lines of credit, including lower-interest loans and rentals. While there are many ways to improve your credit score, it’s important to put emphasis on high-impact factors like timely payments and credit utilization. Consistent efforts over months and years can help you make the best out of your credit score, no matter where you’ve started.
