Credit Repair

Credit Catastrophe? 5 Steps to Help Improve Your Score

A big drop in your credit score can have serious consequences on your life, ranging from reduced access to loans and credit cards to limited options for renting an apartment. Many consumers encounter credit hits for reasons such as surprise expenses, overuse of credit cards and maxed-out lines of credit resulting from emergencies, home repair, job loss or identity theft.

Fortunately, credit scores are dynamic: It takes work to raise a credit score, but it can be done. If your score has dropped, these steps can help you regain your momentum.

  1. Get your free credit report and dispute mistakes
  2. Pay off any past-due accounts
  3. Reduce your debt load
  4. Consult a credit repair agency or a credit counselor
  5. Consider a debt consolidation loan

1. Get your free credit report and dispute mistakes

If you have been denied a loan or discover your credit score is not as high as you’d like it to be, reviewing your credit report is often the best way to get a good sense of what’s going on (and to see how lenders see you).

You’re entitled to a free credit report annually from each of the three major credit bureaus — Experian, Equifax and TransUnion — available at

Review your reports, and if you find errors — accounts deemed late that are actually current, lines of credit you never opened, closed accounts shown as open, etc. — contact the bureau where the error shows up to dispute the information.

The bureaus are legally obligated to investigate your dispute within 30 to 45 days, unless they deem the dispute frivolous.

Generally, when disputing an entry on your credit report, you’ll be asked to provide information and documentation, including:

  • Recent home addresses
  • Government-issued ID
  • Recent bills or financial statements
  • Documentation of the credit-report errors

The bureaus are accustomed to receiving disputes from consumers, and you can contact them online, by phone or by mail. To dispute information electronically, use these links:

If you choose to make disputes by mail, use certified mail — with a return receipt requested — and send copies of any supporting documents, not the originals.

2. Pay off any past-due accounts

Many factors contribute to your credit score, but one of the biggest is your payment history, which represents about 35% of your FICO credit score. If you’re behind (30 days, 60 days, etc.) on any credit cards or other debt payments, it’s important to bring those accounts current and to continue to pay at least the minimum balance on time.

Letting an account go into collections (which often happens at the 90-day mark) is a major negative for your credit score; once mortgage loans are 120 days past due, your lender may start the foreclosure process.

3. Reduce your debt load

Another major determinant of your credit score is what percentage of your available credit you’re using, also referred to as your credit utilization ratio.

If you have $10,000 in available credit across four credit cards and have used $4,000 of it, for example, then your credit utilization is 40%. Experts say it’s ideal to keep your utilization at or below 30%, if possible.

You can reduce your credit utilization by requesting a higher credit limit, taking out additional credit cards (which can ding your credit score) or, most effectively, by paying down some or all of your debt.

4. Consult a credit repair agency or a credit counselor

If you feel you need assistance to repair your credit score, consider working with a credit repair agency. These agencies do not provide any services you can’t do yourself, but they may be helpful for some consumers — for a fee. Credit repair agencies are specifically focused on improving your credit score. They can help you assess which inaccuracies or issues on a credit report are most pressing and how to approach improving them, protect against illegal debt collection actions and contact credit agencies on your behalf, among other services they offer. Their pricing varies.

Consulting a credit counselor may be even more helpful. Credit counseling can help you not only repair your score but also allow you to pinpoint the source of self-inflicted credit challenges, develop a budget and manage credit going forward so you develop better financial habits. The U.S. Department of Justice maintains a list by state of vetted, approved credit counseling agencies.

5. Consider a debt consolidation loan

If you’re juggling multiple credit cards at high, double-digit interest rates, you may be a good candidate for a debt consolidation loan or a home equity line of credit, commonly known as a HELOC.

Such loans could allow you to repay your credit card debts and leave you with a single loan with a lower interest rate. If you can make minimum payments on high-interest cards but can’t make inroads on your overall balance, a lower-interest loan could allow you to make progress on paying down debt.

The Consumer Financial Protection Bureau cautions that not all debt consolidation loans are created equal (some have initial teaser rates that rise over time, etc.) and require research before you commit to them. Additionally, a home equity line of credit is a secured loan against your home — meaning failure to repay as agreed can jeopardize your home ownership status and home equity.

The bottom line

Repairing your credit score takes patience, but pursuing strategies to maintain a healthy credit score can pay off — you’ll be able to qualify for loans at better terms and use debt more strategically, improving your overall financial picture. The higher you can bring your score, the more favorable your financial picture becomes.


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