How To Repair Bad Credit
Approximately 16% of Americans have very poor credit, which is a FICO score below 579, according to Experian's 2019 consumer survey. This means that over 52 million people in the country have poor credit and therefore can’t access high-quality financial products like great rates on loans and good credit cards.
If you’re one of those 52 million people then don’t worry. You’re obviously not alone, and there is honestly quite a bit you can do about it. Actually, once you are able to understand what is affecting your score, you can improve your credit score quite easily (well, relatively).
The first step in learning how to repair bad credit lies in understanding what affects your score (learn more about that here). Once you know why you have bad credit, you can then implement the following tips and tactics to repair it. Follow along for the four best tips on how to repair bad credit.
How to Repair Bad Credit in 2022
1. Start Monitoring Your Credit Score
One simple way to repair bad credit? As we mentioned, start monitoring your score! You won’t know why you have bad credit until you dig a bit deeper into the score.
You can access your credit score and report via websites like AnnualCreditReport.com. Or, if you have an app like Mint or Float Credit, you can simply see your score and what’s affecting it. However, do note that if you’re not accessing your full credit report, you won’t be able to see deeper issues like hard inquiries or public records.
Once you start monitoring your credit score, you can more easily look for errors that have been made. It’s important to fix errors as soon as you see them and to dispute errors on your credit report with the correct institution. Usually, if you are looking at your TransUnion credit report, for example, you’ll need to get in contact with TransUnion to dispute any errors you find. Below, you will find helpful links for disputing errors with the three major credit reporting agencies:
- Dispute an error with TransUnion here
- Dispute an error with Equifax here
- Dispute an error with Experian here
2. Ask to Lower Your Monthly Payments
One of the biggest reasons why people have bad credit is because they can’t ever seem to make payments on time. This is the #1 biggest factor influencing your score, so it’s pretty important to pay attention to. However, most people don’t even know where to begin in learning how to pay down credit card debt. So, let’s start here…
If you are having trouble making your payments on time, talk with your lender or credit card company and ask to lower your monthly payments. Often, if you’re honest with them about your financial situation and provide them with financial records of your income, they’ll work with you to lower the monthly minimum payments.
Once they do this, be sure to set up autopay so that the money is directly sent to the account without you having to remember anything. Alternatively, you can also set up a reminder in your phone or on your calendar so that you always, always remember to make the payment on time.
3. Lower Your Credit Utilization Ratio
Your credit utilization ratio is the amount of credit you’ve used versus your total credit available. As a rule of thumb, this ratio should always be under 30% (although it’s more ideal if you can keep it between 7-10%). What does this mean?
If you have $10,000 in total credit available (i.e your credit line) and have used $2,000 of it, then your credit utilization ratio is 20%. At any given time, your balance should ideally never go over $3,000. However, we understand that sometimes that’s not feasible and you simply have to charge a lot to your credit cards.
If that’s the case, then look into how to increase your credit limit (learn about that here). By increasing your credit, you can charge more to your card without increasing your credit utilization ratio as much. However, just be sure that you’re not racking up large amounts of debt or forgetting to pay on time. Those are both going to hurt your score in the long run.
4. Get a Credit Builder Card
If you’re trying to repair bad credit but can’t get any credit cards to actually build credit, then we suggest looking into a credit builder card. While these types of cards are mainly used for people with no credit history, they’re also great options for those who have poor credit and are being denied for other cards.
Also often called secured cards, you’ll put down a deposit (usually around $200), which will be your credit limit. The idea is that you charge small purchases like weekly gas refills or lunch every once in a while, to the card. Then, pay it off immediately. They’ll report this activity to the credit reporting agencies and it will show on-time payments and low debt, both of which will help you improve your score!
5. Improve with the Cheese Credit Builder
While we can’t help you every step of the way, we can help you monitor and track changes in your credit score, and this helps cover the first step of the process in repairing bad credit.
We are about to launch a credit builder feature that will allow you to easily track changes in your score straight from the Cheese app. You’ll get to see what’s affecting it and then use that to help you create a plan of action for improving little by little.
The best part? It’s all going to be integrated into the Cheese app, making it easy to use and easy to access. Click here to be one of the first users who gets access to this helpful new feature.
