3 Simple Steps to Fix Your Credit Score

When it comes to credit scores, it’s easy to forget that you can rebuild your credit score just as easy as it got destroyed. All you need is patience and a little effort to slowly rebuild your credit score. Rebuilding your credit score will change your life in ways you’ve never imagined.

Many people who have bad credit don’t know what it’s like having a high credit score because they screwed up when they were younger and live with it as the status quo. The higher your credit score, the better treatment you get from almost anyone whoever looks at your credit to determine how they deal with you financially. Banks will give you offers of free money—can you imagine that? Free money to use their credit cards. In many cases, you’ll get offers up to $500 if not more in intro bonuses after you reach a minimum spending target in a given time. Of course, you have to have credit in the 700s to get deals like that but you can do it—and of course, you have to be a responsible person and not spend wildly on credit cards.

I’ve had a credit card since 2012 and never spent a dime on credit card interest. How? you might ask—by being responsible! Never spend beyond your limits and always pay your full credit card bill at the end of your billing cycle. My credit score fell to the mid 500s in college due to unpaid medical bills and I was able to raise it to near 800 over a period of 4 years. No gimmicks, no nonsense, just a process that works. Just think about it, rebuilding your credit opens many doors for you in a society that judges you by “credit worthiness.” By following these simple steps, you’ll be well on your way to excellent credit. Who knows? Maybe even buy a home one day.

Step 1: Dig up your credit junk

You won’t know what you’re dealing with unless you figure out all the bad items on your credit file that’s keeping your score down. Many of these items generally fall off your file after seven years. However, there might incorrect items or others you can work out a deal with. Go to annualcreditreport.com to get a free credit report. You’re entitled to get one free report each year. Careful not to go to any other site promising free credit reports.

Once you get your report, dispute any items that shouldn’t be on there and figure out if you can make any deals on the others. Some items will probably be close to falling off your file so don’t even bother. Let them fall off and watch your score increase.

Step 2: Get a secured credit card

Since your credit score is low, not many credit card companies or banks will approve you for a card. A secured credit card allows you to rebuild your credit with some skin in the game. When I first started, I got a Capital One secured card which allowed me to start the rebuilding process by showing that I was responsible and paying my monthly credit card bill. A secured card is a credit card like all other cards, the only difference is you deposit a small amount of money (usually $50-$100) and the credit card company adds another few hundred dollars to your credit line.

Use this card to pay for small things such as gas and meals and always pay the full bill each cycle. Remember, you’re trying to rebuild and having a balance above 30% of your full credit line, decreases your credit score even further. The other goal is to never pay interest so having to pay a small balance at the end of the month, enables you to pay it in full without a problem.

Eventually the credit card company will see how responsible you are and offer to raise your credit amount. If you have a hard time with self control, don’t accept these offers. Stay with what you have.

Step 3: Watch your credit report

Over time, you’ll see things fall off and see all your hard work and discipline pay off. Stick with one card and be responsible. Continue to dispute items that stick around and see if you can fix them. It’s always a good idea to check up on your credit file and see where things stand. This is a small portion of the overall personal finance well-being we all need to have. As your credit score increases and you are comfortable you won’t go spending wildly just because you have money available in a card, you can venture out and look for cards that pay you back in rewards or cash. When you have a high credit score, you’ll easily get approved for 20-30k dollars in credit limits. I’ve never used more than a few hundred at a time. It’s about not spending beyond limits and using credit responsibly.

Try to these simple steps and start rebuilding your credit like a champ. Credit scores can be hard to understand but over time, with research and experience, you’ll figure out what helps and hurts your score.