How to Fix Credit: The Complete Guide

Your credit score isn't just a number. Good credit can help you secure low interest rates on mortgages, car loans, and personal loans. It might even help you save money on insurance premiums and make it easier to find housing.

Poor credit makes these things harder. When your credit is bad, you may have trouble getting approved for loans and other types of credit. If you do manage to get approved, you'll end up paying hundreds or thousands more in interest than you need to.

Having poor credit can feel demoralizing, but it's not a life sentence. You can learn how to fix credit.

How to fix credit step by step

If you want to improve your credit score, you need a game plan. These steps can help you get started.

Step 1: Check your credit reports and scores

Do you know what's on your credit report? Even if you think you do, it's important to get a copy and look carefully at each item. You can get free copies of your report at AnnualCreditReport.com.

It's not unusual for your credit reports from each of the three credit bureaus (Experian, Equifax, and TransUnion) to vary slightly. You should get a copy from each bureau and scrutinize them for accuracy.

Step 2: Identify negative items affecting your credit

Look closely for anything that may have a negative impact on your credit. These are some common examples:

• High utilization of revolving credit lines (like credit cards)
• Multiple hard inquiries in a short period of time
• Late payments
• Accounts in collections
• Bankruptcies
• A short credit history

If you see any negative items that are not accurate (like past-due accounts you don't recognize), you should dispute them as soon as possible. 

Step 3: Determine which immediate actions to take

Some credit fixes work more quickly than others. These actions may be able to help you kickstart your journey to better credit:

• Paying down credit cards so you're using no more than 30% of each one
• Paying past-due accounts as soon as possible
• Paying accounts in collections (or trying to settle them if you can't pay in full)

Paying down high-interest debts like credit cards can take a long time because so much of each payment goes toward interest. If you can qualify for a consolidation loan, that may help speed up the payoff process. Additionally, you'll likely see a boost in your credit score right after you consolidate.

Paying past-due accounts is especially critical. If you don't pay a delinquent account, the lender might send it to a debt collector. Having any debt go to collections can dramatically lower your credit score. And unfortunately, even if you pay off a debt in collections, it still stays on your account for seven years.

However, if you already have one or more debts in collections, paying them off may help limit the damage. Settling debts and paying them off for less than face value is worse for your credit than paying them in full, but it's better than not paying at all.

If you want to settle a debt, get in touch with the creditor directly to see if they would be open to settlement. Kikoff has debt negotiation tools that can help you do this.

Step 4: Rebuild with healthy credit habits

Your payment history is the most important factor in determining your credit score. If you continue to make all payments on time and in full, that alone should improve your credit over time. 

But what if you don't currently have open lines of credit or don't qualify for a traditional credit card? Secured credit cards and credit-builder loans are two tools that can make a difference.

Step 5: Keep hard inquiries to a minimum

When you apply for new credit, a lender will usually perform what's called a hard inquiry to access your credit report. A single hard inquiry will usually cause a small (but temporary) drop in your score.

However, if you have too many hard inquiries over a short period of time, your score may be substantially lowered. That's because multiple credit applications in a short period of time suggest to lenders that you may be desperate for credit.

Step 6: Manage available credit

As you work to rebuild your credit, you should avoid racking up more debt. If you do this while simultaneously increasing your available credit, you can lower your credit utilization and increase your score.

Best apps for rebuilding your credit

Here are three apps that might make your journey toward better credit a little easier.

Kikoff

Kikoff helps you approach the problem of bad credit from multiple angles. Users can benefit from several different tools and features, including:

• Interest-free credit lines for building credit
• Rent reporting
• Secured credit cards and credit-builder loans
• Debt dispute tools and bill negotiation
• Identity theft protection

The app is free to join. If you want to unlock premium credit-building features, you can choose from several affordable subscription levels.

Need help learning how to improve your credit?

Having the right support on your credit-building journey makes a difference, and Kikoff is here for you. Our lines of credit, credit-builder loans, and other tools can help you build credit over time. 

We don't check your credit when you apply, and it only takes a few minutes to get started. Create your account with us today!