Improving your credit doesn’t always require paid professional help. Debt.com explains both options.
Whether you’re just starting out or you need to rebuild after period of financial distress, knowing how to improve your credit score is essential. You can always pay a professional to do the work if you have the means, but not the time. However, there is nothing that paid credit repair and restoration services provide that you can’t effectively do on your own.
This guide teaches how to improve your credit score for free on your own. We’ll also point you to paid services when they’re available, so you can decide if it’s worth the cost. If you have any questions or need help achieving the score you want, just head over to Debt.com’s Credit Help Center.
Below is a quick snapshot of the process and the differences between the free and paid methods of credit improvement. You can read more about each step below and find a helpful FAQ at the end of this page.
|How to improve your credit score step-by-step:|
|The Free Way||The Paid Way|
|Step 1: Download your credit reports||Go to annualcreditreport.com||Pay a credit repair service to obtain them or subscribe to a credit monitoring service|
|Step 2: Review reports for errors / negative items||Review your reports yourself||Credit repair service completes review and confirms errors with you|
|Step 3: Dispute any errors to have info removed||Make all disputes yourself directly with the bureaus||State-licensed credit repair attorney makes disputes on your behalf|
|Step 4: Offset negative items with positive actions||Do this without a credit monitoring or with a free service||Use paid credit monitoring to track score improvement|
|Step 5: Gradually build credit to achieve the score you want||If you’re not monitoring, expect score improvement within one to two years||With monitoring, you can exactly gauge when you’re done|
Step 1: Download your credit reports for free
There is really one place that allows you to download your credit reports for free with honestly no strings attached. It’s www.annualcreditreport.com. This is a government-mandated website that was launched as part of the Fair Credit Reporting Act. That law states allows that every consumer can request a free copy of their credit report once every twelve months. Annualcreditreport.com is the portal they created to make that possible.
This is not run buy a private company and there is not hidden way of charging you later. You don’t even enter credit card information to access it. Just answer a few security questions based on the information contained in your report. Then you can download your reports from each of the three credit bureaus.
There is no requirement to download all three at once. In theory, they should all say the same thing. However, errors and discrepancies can occur – that’s part of the reason you need to download your reports. So, you need to decide if you want to download all of them or just one at a time.
- If you just recovered from financial distress, you may want all three. That’s because you want to make sure that all three reporting agencies show your newly debt-free and financially stable status.
- If you’re just working to improve your credit over time, you may only need one. This allows you to download the three reports throughout the year, giving you better tracking ability.
If you download all three reports then decide that you want to check them again within that year, you’ll usually have to pay. You can either pay a specific bureau for another copy OR you can use a paid credit monitoring service. But, if you use the free downloads strategically, you may be able to avoid this cost.
Step 2: Review your credit reports
Once you get your reports it’s time to read through them. If you’ve never looked at your report, don’t be intimidated! We have a resource page that can walk you through reading your report. Basically, there are two main goals to accomplish as you review your report:
- You must identify any errors, mistakes or discrepancies that you need to dispute.
- You also need to review the negative items that are not errors to see where your credit actually stands.
The first part of this exercise relates to credit repair. About 1 in 20 reports contains at least one error, and 1 in 5 says something that damages your score. So, you need to check to make sure that your credit reports are accurate. This is what you need to look out for:
- Incorrect personal information, including aliases that aren’t you
- Accounts that don’t belong to you
- Duplicate accounts (i.e. the report lists your mortgage twice)
- Missed payments that you made on time
- Incorrect or out-of-date account statuses or balance amounts
- Collection accounts that aren’t yours
Any of those items can lead to credit problems for you and many would decrease your score if they exist. So, you want to make sure your report is accurate and error-free. If you find a discrepancy, highlight it for the next step.
In addition to mistakes, you also want to take note of any negative information that’s legitimate. These are items that contribute to a lower credit score. Knowing what those items are helps you craft an effective strategy to offset that damage.
Step 3: Dispute any items that are incorrect
By law, you can dispute items in your credit file that you believe are inaccurate. You simply contact the credit bureau and ask them to verify the item. They have 30 days to verify that the information is correct with the creditor. If it can’t be verified, they must remove it and provide a new copy of your report showing the correction.
That is the sum total of what credit repair is, despite any rip-offs or horror stories that you heard. It’s not the credit repair process that’s shady – it’s many credit repair companies. These companies often make bold guarantees about improving your score by a certain amount. That’s not possible to guarantee, which is why these companies get into trouble.
That’s not to say that there are not legitimate third-party credit repair services either. However, if you decide to use a paid credit repair service, just check the company’s background thoroughly. In order to legally repair your credit on your behalf, they must have a state-licensed attorney on staff that is authorized to make dispute. Check independent review websites and make sure a company has a proven record before you sign up for anything.
However, just to be clear, even a legitimate credit repair company cannot do anything that you can’t do yourself. If you hire a company, they will review your reports, identify potential discrepancies and make disputes on your behalf. It’s the exact same thing as free credit repair, just without the hassle of doing it yourself.
Depending on the number of items you need to dispute and how promptly you correspond with the credit bureaus, these first three steps generally take anywhere from 1-2 months.
Step 4: Evaluate the negative information you’re up against
Once you remove all the errors, any negative information left gives you an idea of how much work you have. This step begins the slower part of the process: rebuilding your credit. There’s no quick fix here. In order to achieve the credit score you want, it takes effort and time.
The focus here is about taking positive actions that help you build credit, while avoiding negative actions that hurt it. This works because the impact of negative information on your score decreases over time. In other words, a missed payment last month hurts you much worse than a missed payment six years ago. So, although most negative items stick around on your credit for seven years, they don’t carry the same weight over that time.
As a result, you can offset negative items incurred in the past with positive actions now. At the same time, you avoid taking any actions that could decrease your score. This means:
- Making all payments on time
- Keeping credit utilization low by not running up balances on your credit cards
- Gradually opening credit to avoid opening too many accounts at once
- Maintaining a good, health mix of good types of debt
- Avoiding account closures that could decrease the length of your credit history
Step 5: Build credit by taking small strategic steps
The right way to build credit is incrementally and gradually; that’s true whether you’re new to credit or rebuilding after bankruptcy. You don’t want to take on too much new debt at once and you don’t want to overextend yourself. So, you take baby steps to better credit.
- Start by getting a secured credit card that’s designed to help people with low scores build credit.
- You open this credit line with a small cash deposit, then you typically have a credit line equal to the deposit you made.
- Make practical, reasonable charges that you can pay off in-full at the end of every month.
This 3-step system keeps your net utilization ratio a 0% – that’s the second biggest factor in credit score calculations. It also builds a monthly positive payment history, which is the most important credit factor.
After about six months with this account, consider taking on more debt. You can either open another credit card or apply for a loan. Creditors consider traditional loans to be good debt, so they help your score. If you need a car, apply for an auto loan you can afford. If not, consider a personal loan and use the funds for an investment, home renovation project, or even a vacation.
Once you secure the new loan or credit card, continue making payments. If you take on multiple credit cards, always make sure to keep your utilization ratio below 10%. That means if your total credit limit is $1,000, then you should never carry a balance of more than $100. To be clear, you do not need to carry any balance over month to month to achieve a good score. Paying off your balances in full every month allows to use credit interest-free, avoid debt problems, and still build credit.
Improve Your Credit Score FAQ
How long does it take to improve my credit score?
If you follow the five steps above, you should achieve a better credit score within six months to a year. How much your credit improves and how fast really depends on your profile:
- Where your credit score was when you started
- The number of negative items in your report
- When each of those items was incurred
So, for instance, let’s say you filed Chapter 13 bankruptcy six years ago and you’ve had no negative credit activity since. In this case, you can work to build better credit over the next year. Then when that bankruptcy penalty expires seven years from the date of final discharge, your score should improve more.
However, if you filed for Chapter 13 bankruptcy last year, then there’s no way to get rid of that penalty early. You can still take steps to build credit, but you won’t see that big jump described above for another 6 years. That’s not to say you can’t build your way to at least a fair score; it’s just going to take more effort and time.
In general, if you had a low credit score to start, the method we describe here takes about six months to a year to see a notably better score. Just keep in mind, the higher your score is when you start, the more work it takes to move the needle.
How is it possible to improve my score without knowing it?
You’ll notice in the method above, we don’t mention anything about paying for your credit score. So, if you do the completely free method of improving your credit, you could be working blind. But that’s not a roadblock to achieving better credit. Just because you don’t know the exact three-digit number, it doesn’t mean the steps above won’t work. You can trust the system, you just won’t know the exact numeric improvement.
That being said, if you want to know your score when you start and as you progress, then you need credit monitoring. These services vary on what they provide and how much they cost. At a basic level, they all alert you when there are changes in your score. Most only track one or two scores, but keep in mind that you have many. FICO scores are used in about 90% of all lending decisions. However, even if you use a service that monitors a different score, they all follow the same calculation structure. So, good actions that increase one score will never negatively impact another. They often just vary by how many points your score changes.
How can I improve my score faster?
Legally, there is no way to improve your credit score faster than the organic method described above. There’s no magic bullet that will take a score from 500 to 750 in the blink of an eye. The only time you may see significant numeric jumps is when a hefty negative item like bankruptcy or foreclosure naturally falls off your report. And even then, a jump of 250 points would typically be unlikely.
If a company promises that they can improve your credit score instantly or even within just one month, run. It’s a scam. They’re almost certainly going to tell you to do something illegal that can lead to criminal prosecution. This usually involves fraudulently creating a completely new credit profile for you, using a fake Social Security number; in some cases, they advise you to use an Employer Identification Number (EIN) that’s supposed to be for business credit.
Both of these practices are 100% illegal and amount to credit fraud; you can be criminally prosecuted, right alongside the company that told you to do it (if they haven’t disappeared). An instantly better score is not worth costly fines and the possibility of jailtime. Report any company that gives you this advice immediately to the FTC.
Article last modified on March 7, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: How to Improve Your Credit Score Step-by-Step - AMP.