If your credit score is below 600, you’ll struggle to be approved for any type of credit. You’ll likely find it difficult to rent an apartment, or get a credit card, or take out a loan.
The good news? Your credit score doesn’t have to stay low. If you make responsible decisions about your credit and your payments, your credit score will quickly improve.
Want to improve your credit? Follow these 10 steps, and your score will be 700 or higher before you know it.
1. Always make your payments on time
Maintaining a current, consistent pattern of payments on your bills is the biggest step you can take towards good credit. Your payment history accounts for a whopping 35% of your total FICO score. Nothing can raise – or lower – a FICO score more than the way you pay your bills.
2. Correct any errors on your credit report
If you aren’t already checking your credit report regularly, it’s time to start. Odds are good that there is at least one error. Even a seemingly small error, like a misspelled name, can result in your shaky credit being conflated with someone else’s even worse credit.
You can request one free credit report a year from the three major bureaus: TransUnion, Equifax and Experian. Get your credit report at theannualcreditreport.com, and check it for accuracy.
3. Pay off or settle outstanding bills
It’s true that if you wait long enough, many creditors will give up trying to collect what you owe. But that outstanding debt can tarnish your credit score for up to seven years.
If you have the money, you should contact your creditors to pay off any outstanding bills right away. Or if you’re late on a loan whose payments you can no longer afford, consider refinancing to get back on track.
Once you’ve paid off the bills in arrears, make sure your credit report reflects that fact.
4. Increase your monthly credit card payments
If you’re only making minimum payments on your credit card bills, you’re not doing yourself any favors. Ideally, you should pay off balances in full every month. If that’s not possible, try to generate extra income or savings elsewhere so that you can start boosting your monthly payments. After a few months, you’ll begin to see a real difference in your balances – and your FICO score.
5. Maintain a low ratio of debt to available credit
Your debt-to-total credit ratio determines 30% of your FICO score. Carrying a high ratio can tank your credit. By resisting the urge to max out your credit cards, you’ll lower your stress and raise your credit score.
6. Diversify your credit accounts
Having different types of credit can boost your FICO score. Already have a credit card? Try to obtain an installment loan. If you don’t qualify for an unsecured loan, you can ask for a loan secured by a bank account or certificate of deposit.
You may have better luck applying for a loan from a credit union than from a bank. The more types of credit you’re able to manage responsibly, the more credit-worthy you will look.
7. Get a secured credit card
If you’re unable to qualify for a standard (unsecured) credit card with your current credit score, consider a secured card. Even applicants with poor credit can qualify for secured credit cards. That’s because secured credit cards are are backed by cash deposits which serve as collateral, providing an additional layer of security for the credit card company. In this way, it’s like a checking account, letting users borrow money from themselves. But unlike a checking account, using a secured credit card responsibly can improve your credit score.
When looking for the right secured credit card for you, be sure to select one that reports to credit bureaus. If it doesn’t, you won’t see any impact on your credit score.
8. Piggyback your way to good credit
If you have family members with good credit, you can become an authorized user on one or more of their credit cards. Your credit will get an immediate boost, and you won’t be responsible for any of their debts.
But be careful with this tactic. If you slack off on paying your bills, you could trash your family member’s credit, not to mention your relationship. Likewise, if their credit takes a hit, yours will too.
9. Consolidate your bills
Consolidating your credit card bills into a single monthly payment accomplishes two purposes. It eliminates high-interest credit card debt (and likely obtaining a lower total monthly payment), and makes it easier to keep track of payments. Just don’t make the mistake of running up new debts to replace the debts you wiped out.
10. Establish a bank line of credit
If you’re a good, long-standing customer, you may be able to obtain a line of credit from your bank even with a low credit score. Having an available line of credit can boost your credit to debt ratio. And unlike a loan, a line of credit usually does not generate payments due until you actually use it.
Barring the correction of multiple, serious errors on your credit report, it’s unlikely that you’ll be able to raise your FICO score from 550 to 700 overnight. You’ll need to exercise patience, along with consistent credit repair strategies, to yield results. But over time, following one or more of the strategies listed above will improve your credit report and raise your FICO score.
Looking for a credit card to help you rebuild your credit score? SuperMoney can help — we’ve compiled a list of the best credit cards for bad credit. If you’re looking for more personalized credit counseling, we can help with that too.