7 Steps To Help Repair Bad Credit


Bad credit is expensive and problematic. It can mean you don’t get approved for loans or credit cards or that a landlord won’t rent to you. But it can also increase the cost of credit for you. Consider this: The average total interest cost on a car loan for someone with very good credit is around $3,600. Someone who only has fair credit could pay around $7,500 in interest for a similar loan.

Repairing bad credit is a good move, even if you don’t plan on buying a big ticket item like a car or home soon. Good credit opens doors, helping you get access to better financial tools and rewards. In some cases, it can even mean the difference in getting hired or approved for the best rates on auto insurance.

If you think you have bad credit, you have options. Check out the seven steps to repair bad credit below for ideas on how you might work to improve your credit history.

1. Get a Copy of Your Credit Report

person filling out paperwork next to calculator

Start by getting a copy of your credit report. This lets you understand what negative items might be showing up to drag down your score.

Under federal law, you can get one free copy of your credit report from each of the three major credit bureaus every 12 months. You can do so online at AnnualCreditReport.com.

Other ways you can access your credit report include:

  • Requesting it after you have been denied for credit. You should receive a letter letting you know why you were denied. If you were denied based on information in your credit profile, the lender must tell you. You can also use that letter to obtain a free credit report from the applicable bureau.
  • Signing up for a free credit reporting service. Some online services provide you with an informational copy of your credit report. Depending on which service, it may include only the information from one bureau.
  • Paying for a credit reporting service. For more access to your credit reports and other services, you can consider paid credit reporting options.

2. Analyze the Negative Factors on Your Score

coin jar with money on past due medical bills

Once you have your credit reports in hand, look for negative items that could be driving down your score. Common negative items include:

  • Late payments. Any late payments can bring down your score, but the later the payment — or the more often the issue occurred — the greater the impact.
  • Collection accounts. Defaulting on an account and having it go to collections brings your score down.
  • Hard inquiries. When you apply for a loan or credit card, the lender may check your credit. This is known as a hard inquiry. Each hard inquiry can have a small, temporary negative impact on your score.
  • Bankruptcies or foreclosures. These items indicate that you didn’t pay your debts as originally agreed, causing a negative impact on your score.
  • High revolving credit balances. If you owe at or near your credit limits on revolving accounts such as credit cards, this can reduce your credit score.

3. Dispute Inaccurate Negative Items

equifax personal information impact check

Begin your crusade to better credit by addressing any inaccurate items that might be on your credit report. Typos, missing information or straight-up wrong information can cause your credit score to be lower than it should be.

Under the Fair Credit Reporting Act, you have a right to a credit report free of errors. If you find an inaccuracy on one of your reports, you can dispute it with the credit bureau and ask them to investigate it. Simply write a letter stating that you dispute the item and why and include any documentation you have to make the case. Send the letter to the credit bureau in question:

  • P.O. Box 740256, Atlanta, GA 30374.
  • P.O. Box 4500, Allen, TX 75013.
  • P.O. Box 2000, Chester, PA 19016.

4. Create a Plan to Address Accurate Negative Items

couple looking at paperwork and computer screen

Consider how you can address any negative items on your report that are accurate. For example, if you’re behind on payments, catching up may help improve things in the future. Paying off open collections or resolving other issues may also make a difference for your future credit score.

5. Begin Building a Positive Payment History

woman sitting on couch while talking on mobile phone looking at laptop and holding credit card

After doing what you can to mitigate negative items on your credit reports, you might want to take actions that help you build positive payment histories. The easiest way to do this is to ensure you’re making timely payments on any existing debt you have, including auto loans, student loans, a mortgage or credit cards.

If you don’t have open accounts or only have one, you might want to add something else. Taking out a personal loan or getting a credit card and making timely payments every month can help you build your credit. There are both loans and credit cards that don’t require you to have good credit to get approved for, so you might start with those types of products.

That includes a personal loan from Wise Loan. You don’t need good credit to get approved, and Wise Loan reports to two of the three major credit bureaus to help you get the biggest benefit of paying your loan on time and as agreed. Apply today; depending on when you apply and how you choose to receive your funds, you may even get the money the same day or instantly.

6. Pay Down High Revolving Debt Balances

bill finance and calculator with pen and credit card

Credit utilization is a big factor in your credit score. It’s the rate at which you’ve used your revolving credit such as credit cards or lines of credit. For example, if you have a credit limit of $1,000 and a balance of $800, your credit utilization is 80%.

According to the Consumer Financial Protection Bureau, keeping your credit utilization below 30% is ideal.

7. Maintain Positive Financial Management

hand writing home budget with calculator

As you move into the future, keeping up with positive financial management is the best way to continue to improve your credit score. That includes:

  • Paying all your bills on time
  • Budgeting well so you don’t need to rely on credit constantly
  • Managing accounts and keeping balances down
  • Choosing to work with responsible lenders when you do apply for credit

The only way to repair bad credit is to stay on top of things, so whatever approach you take, be sure to develop good habits and remain aware of your financial status at all times.





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