4 Ways to Improve Your Credit Score When You Have Bad Credit

4 Ways to Improve Your Credit Score When You Have Bad Credit
Ashley Feinstein
By: Ashley Feinstein
Posted: August 23, 2013
Experts share their tips and advice daily on BadCredit.org, helping subprime consumers navigate the world of personal finance.

Is your credit score lower than you’d like? Luckily, credit scores aren’t static – scores can improve with diligent action over time.

Here are four ways to get you started:

1. Check your credit report for mistakes.

Start by requesting a free copy of your credit report and check it for errors. Correcting any errors is the quickest way to repair your credit.

Your credit score is calculated from all of the data in your credit report. The biggest items to watch for are incorrectly listed late payments and debt amounts.

If you find any errors, dispute them with the credit bureaus (TransUnion, Equifax and Experian) and the reporting agency.

2. Always pay bills on time.

On-time credit card payments are one of the largest drivers of your credit score because they compose 35 percent of your credit score calculation.

You will never miss a payment again if you set up automatic payments through your credit card company.

Most companies will send an email reminder and statement before the payment goes through so cardholders can check for errors or cancel a payment if needed.

You might have the intention of paying bills on time and in full, but sometimes life can get in the way. This is one of the quickest ways to raise your credit score.


“Credit card payments are one of the

largest drivers of your credit score.”

3. Reduce your outstanding debt.

Another factor of your credit score is the amount you owe, which composes 30 percent of your credit score.

This factor is determined by your credit utilization ratio. Your credit utilization ratio is the amount of outstanding debt you owe divided by your credit limits.

The lower this ratio is, the better your credit score.

One way to decrease this ratio is by reducing the amount of debt you owe.

An easy way to reduce the amount of debt you owe is to stop using your credit cards and make a list of your debts with payment dates and interest rates.

Next, come up with a payment plan. Some people choose to pay off their highest interest rate loans first, while others pay off the smallest balances first.

This method helps some borrowers gain momentum and pay down their debt faster, while making sure to pay at least the minimum payments for each account on time.

4. Negotiate your credit limits.

Another way to decrease your credit utilization ratio is to increase your credit limits.

Increase your credit limits cautiously and only if you will not end up running up your credit card balances. Some credit card companies will increase your limit automatically over time.

I recommend calling your credit card company once or twice per year to ask for a limit increase.

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