How to Fix Bad Credit: A Step-By-Step Guide

By: iThink Financial | May 18, 2022

Did you know that nearly one-third of all businesses check job applicants' credit scores before hiring them?

Even though it can be a challenging process to repair bad credit, you'll open the door to many new opportunities. Unfortunately, it isn't easy to do this if you don't know the right strategies and steps.

We've created a guide to help you figure out how to get rid of bad credit.

Review Your Credit Report and Look for Errors

All you need to access your credit report is to download it from one of the top credit bureaus such as Experian, Equifax, and TransUnion. Most people are surprised to find out how often their credit reports contain errors.

There are several reasons why this happens. Sometimes closed accounts show as if they were still open. It's also common for the same debts to be reported many times. Lastly, credit reports often display the wrong balances.

Thankfully, it's easy to find out what your credit report says. Even though the major credit bureaus won't display your credit rating, they will tell you about any troublesome areas and parts of your report that you can improve.

If you do see any details on your credit report that are not correct, all you need to do is send a letter to the relevant credit reporting agency. If you're not sure how to write a letter to your credit reporting agency, consider using the Federal Trade Commission's example letter as a template.

Review the Statutes of Limitations

Glance over your credit report and look for any bills you weren't aware of. You should also ensure that the statutes of limitations on your debts have not expired. Depending on how much time has passed, collections agencies may no longer be able to sue you.

Assess Your Credit Utilization Ratio

Your credit utilization ratio is essential to be aware of if you're trying to figure out how to fix bad credit. It will tell you how much credit you're using in relation to your credit limit.

Experts recommend that this ratio never surpasses thirty percent of your spending limit. This means that somebody with ten thousand dollars of available credit should never use more than three thousand dollars of their credit. Your credit score will start going down once you start using more than a third of your available credit.

Commit Yourself to Pay Bills When They're Due

Your payment history plays a massive role in your overall credit score. This is why you must plan to pay off your debts and commit yourself to pay off your future bills on time.

If you have any credit card debts in collections, you should also make it a priority to pay them off. Until you do this, it will be challenging to improve your credit score.

Many people face the problem that they don't know how to develop an effective strategy for paying off their debts. That's why it's such a good idea to reach out to financial planners or credit experts for help. One of the easiest ways to do this is by getting ahold of the National Foundation for Credit Counseling.

Ask a Loved One to Include You as an Authorized User of Their Credit Card

Once you're an authorized user of somebody else's credit card, you will be able to use it as if it were your own. The only difference is that you won't be penalized for credit card debt that the card owner incurs. This is an effective way to improve your credit score because you'll be sharing the card's payment history.

If you choose to do this, you won't be putting yourself at financial risk. It's the cardholder whose credit will be impacted if debts go unpaid.

If you want to become an authorized user on somebody else's credit card, you must think twice about whose card you use. Make sure to get precise information from the cardholder about whether or not they pay off their credit card statements on time and their spending habits.

Use a Tool to Raise Your Credit Score

There are various tools that can successfully boost your credit score by adding to your credit file. This is possible because they add alternative information to your credit report. These details are not usually taken into account by the most well-known models for scoring credit.

Here are two of the best programs you can use to raise your credit score.

Experian Boost

This is a great tool for those who subscribe to services such as Amazon Prime, Hulu, and Spotify because it will report payments that you make to these services. Since this service is totally free, it's one of the most popular services used by those who want to build their credit scores.

UltraFICO

UltraFICO is similar to Experian Boost. Both are free, and both will help you improve your credit score. What makes UltraFico different is that it uses a unique credit model that grades how much risk you pose as a borrower.

It does this by taking the transaction history of your banking accounts into consideration when assessing your credit score. If you're in financial trouble, it's a great idea to consider using this program.

Make Use of a Rent-Tracking Platform

If you rent from a landlord who owns various properties, it's possible that they use rent reporting services to keep track of payments that their tenants make. It's also often the case that landlords report their tenants' rent payments to the credit bureaus.


It's a good idea to figure out whether or not your landlord uses any of these platforms because you can use these platforms to improve your credit score.

In the case that your landlord doesn't use these services, consider subscribing to a rent reporting service. The most popular ones are RentTrack and Esusu. As long as you're willing to pay a monthly subscription fee, these services will add rent payments you make onto your credit report.

Consolidate Your Debt

People consolidate their debts by joining them together into a single debt. In many cases, people who do this end up paying lower interest rates than they would if they were paying off multiple debts;

It's a particularly good idea to consolidate your debts if you struggle to remember the different dates that your various payments are due.

Find Out How Long It Will Take To Improve Your Credit

Everybody has a different credit history. This means that there is no way to say how long it will take you to get rid of poor credit. If you have a long history of bad credit, it will take longer to improve your credit than it would if you have only had bad credit for several months.

You should also keep in mind that it can take up to a month for your credit reports to update. Therefore, be patient after paying off debts.

Create a Budget Plan and Focus on Saving Money

If you want to improve your credit score, one of the best things you can do is create a long-term budget plan. At the very least, resist the temptation to apply for new loans or credit cards until you have a long-term strategy in place. This is because it can hurt your credit score when you apply for multiple credit cards at the same time.

Keep an Eye on Your Credit After You've Accomplished Your Goal

After you've finished fixing bad credit, it's easy to forget about your credit score and focus on something else. Even though you won't need to pay as much attention to your credit score as you did in the past, you should continue to watch it.


By doing this, it will be easier for you to identify problems that might cause your credit score to fall again. Doing this will also help you know if somebody steals your identity. You'll therefore have the chance to solve the problem before it's too late.

Start Getting Rid of Bad Credit Today

If you've been wondering how to get rid of bad credit, keep in mind that the first thing you need to do is check for errors in your credit report. It's also essential to make a plan for paying your bills before they're due and to use a program like Experian Boost to improve your credit score.

If you're interested in finding out more about what it takes to get rid of bad credit, we're here to help you. Please don't hesitate to contact us and book an appointment for anything you might need.

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