How to Rebuild Damaged Credit

tucker7 Min. Read

If you have damaged credit, you’re not alone. Many people face challenges with their credit scores due to inexperience or financial setbacks. While negative marks on your credit report can linger for many years, it’s important to know that you’re not condemned to a life with low credit. With positive behavior changes, time, and commitment, you can rebuild your credit and improve your financial future.

Big changes in your credit score may take time—typically around 24 months of consistent, positive financial habits. During this period, focus on making all your bill and loan payments on time, managing your credit mix, minimizing new credit inquiries, and keeping your balances low. Each of these factors plays a role in your credit score and effectively managing them will set you on the path to achieving your financial goals.

6 Ways to Improve Your Credit Score

Here’s a statistic you might not know: over 70% of your credit score is based on your past two years of credit behavior. Now is the time to begin the journey of establishing good financial habits to rebuild your credit score.

Improving your credit score can open the door to new opportunities and help you achieve your financial goals. If your credit score has been damaged in the past, consider these 6 strategies to boost your score and get back on track.

1. Dispute credit report errors. Remember that errors on your credit report can unfairly lower your credit score. Regularly review your credit reports (at least annually) from all three major credit bureaus and dispute any inaccuracies you find. This might include inaccurate personal information, accounts that don’t belong to you, or incorrect payment statuses. Correcting these errors can result in small, quick improvements to your credit score.
2. Pay down high balances. High credit card balances can negatively impact your credit utilization ratio, a key factor in your credit score. Focus on paying down high-interest credit card debt first and aim to keep your credit utilization below 30%. Reducing your balances can help you improve your credit score and save you money on interest in the long run.
3. Use a secured credit card. If you have damaged credit, a secured credit card can help you rebuild it. Secured credit cards require a security deposit, which serves as your credit limit. Use the card responsibly by making small purchases and paying off the balance in full each month. Over time, this positive activity will be reported to the credit bureaus, helping to improve your credit score.
4. Avoid closing old accounts. You might be tempted to close credit accounts you’re not currently using. After all, you’ll be less tempted to run up balances with fewer accounts, right? But the length of your credit history is an important factor in your credit score. Closing old accounts can shorten the average age of your credit history and potentially lower your score. Instead, keep old accounts open and use them occasionally to show that you can manage credit responsibly over time.
5. Contact your creditors. Many people don’t realize that you can (and should!) be proactive in working with your creditors. If you’ve fallen behind on payments—or expect to—reach out to your creditors to discuss solutions. Negotiating help with creditors can put you back on the right track and prevent further damage to your score. Learn more about how to talk to creditors and debt collectors.
6. Create a budget and stick to it. Sticking to a budget can help you better manage your finances and meet your financial obligations. Tracking your income and expenses will allow you to identify areas to reduce spending and allocate more funds to paying down debt. A well-managed budget can also prevent future financial trouble that might hurt your credit score.

Need Help Rebuilding Credit? Here’s Where to Turn

Millions of people are working to get back on track and restore their credit. If you need help, you’re not alone.

When you’re looking for reliable information on improving your credit, you might feel like you’re bombarded with information. Who can you trust? There are many reputable, free resources out there.

• Your current bank or credit union.
• Government entities like the Consumer Financial Protection Bureau (CFPB).
• Non-profits like Next Gen Personal Finance (NGPF).
• AnnualCreditReport.com, a free site that you can use to access your credit report and look up your credit score.
• Credit counseling agencies like GreenPath, which offers free consultations.
• Nerd Wallet offers free information on personal finance topics.

Remember, you shouldn’t have to pay to rebuild your credit or get information on how to manage debt. Beware of companies that claim they can repair your credit fast. These are often scams. Instead, seek out a financial counselor who can help you understand your financial goals and the steps to get there.

There’s no fast fix for building or repairing your credit—it takes knowledge, behavior changes, time, and commitment. But small, consistent changes can make a big impact.

Marine Credit Union Can Help You Improve Your Credit Score with Get Credit

Don’t let damaged credit get in the way of where you want to go. Get Credit is a simple way to build or rebuild your credit and build up a stack of cash along the way. It’s a 12-month loan that helps you improve your credit history and increase your savings by making on-time payments.

Learn more about Get Credit.

Frequently Asked Questions: Repairing Your Credit

How Long Does It Take to Repair Credit?

How long it takes to repair your credit depends on the severity of the issues and the actions you take to address them. Minor errors can be corrected within a few months, while more significant issues, like missed payments or collections, may take several months to a few years to resolve.

Can I Repair My Credit on My Own, Or Do I Need Professional Help?

Yes, it is possible to repair your credit on your own! Strategies like disputing errors on your credit report, paying down debt, and creating a budget can put you on the right track to an improved credit score. However, if your credit situation is complex or overwhelming, you might benefit from the help of a financial counselor or credit counseling agency like GreenPath.

Will Paying Off Collections Improve My Credit Score? 

Paying off collections can improve your credit score, especially if the collection account is marked as “paid” or “settled.” However, the impact may not be immediate, and the account will still appear on your credit report for up to seven years. Over time, a paid collection is better for your credit score than an unpaid one.

Can I Remove a Late Payment from My Credit Report?

If you have a strong history of on-time payments, you may be able to remove a late payment from your credit report. Contact the creditor to request a goodwill adjustment. If the late payment is an error, file a dispute with the creditor and the credit bureaus.

Does Settling a Debt Affect My Credit Score? 

Debt settlement can help you reduce or eliminate outstanding credit obligations, but it can also negatively impact your credit score. Depending on the time of debt, the amount, and other factors, settling a debt can lower your credit score by as much as 100 points. Debt settlement will also be noted on your credit report, and it can stay there for up to seven years.

Learn more about debt settlement and debt consolidation.

Can Opening New Credit Accounts Help Repair My Credit? 

Opening new credit accounts can help repair your credit—but only if you manage them responsibly. If you use the account infrequently and pay down balances immediately, a new credit account can help you improve your credit utilization ratio and diversify your credit mix. However, avoid opening too many accounts at once, as multiple hard inquiries on your credit report can temporarily lower your score.

How Will Closing Old Credit Accounts Impact My Credit Score? 

Closing old credit accounts can negatively impact your credit score by reducing the average age of your credit history and increasing your credit utilization ratio. It’s generally better to keep old accounts open and use them occasionally to maintain a longer credit history and a lower utilization rate.

How Can I Improve My Credit Utilization Ratio? 

To improve your credit utilization ratio, aim to keep your credit card balances below 30% of your available credit limit. You can achieve this by paying down existing balances, requesting credit limit increases (without increasing your spending), and using multiple cards responsibly.

How Often Should I Check My Credit Report While Repairing My Credit? 

Typically, it’s a good idea to check your credit report at least once a year. While working to improve your credit, you may want to check your score more frequently (monthly or quarterly). Regularly monitoring your credit score allows you to quickly identify errors or suspicious activity and ensure your efforts to improve your credit are reflected accurately.

Learn more about how to monitor your credit.

What Should I Do If I Suspect Identity Theft Is Affecting My Credit? 

If you suspect identity theft, act quickly by contacting the three major credit bureaus to place a fraud alert on your credit reports. Frequently review your credit reports for unauthorized accounts or transactions, dispute any incorrect or fraudulent entries, and report the identity theft to the Federal Trade Commission (FTC) and local law enforcement.

Learn more about how to report identity theft.

Credit Resources From Marine Credit Union

Understanding Credit

Marine Credit Union’s Get Credit

How to Report Your Rent to Credit Bureaus

Paying Down Debt to Improve Credit

Paying Down Existing Loans

Additional Credit Resources

GreenPath Financial Wellness

Wisconsin Department of Public Instruction: Personal Financial Literacy

My FICO: FICO Scores vs. Credit Scores

VantageScore

Consumer Financial Protection Bureau

Next Gen Personal Finance

Annual Credit Report