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How to rebuild credit

Your credit score has multiple factors, so there are many ways to improve your credit score.

This guide is sponsored by Current, a fintech company offering FDIC-insured banking services to over 4 million customers.

Nearly a quarter of Americans haven’t checked their credit score in over six months, as reported by Finder’s Consumer Confidence Index. Knowing what your score is and what’s impacted is an important step in understanding how you can improve your credit score. Once you have a clear picture of your score and its influencing factors, it’s time to explore effective strategies that can help you boost your creditworthiness.

8 ways to improve your credit score

Here are eight different ways you can work to repair your FICO credit score.

1. Check your credit reports

Get one free copy of your credit report every 12 months from each of the three credit bureaus: Experian, TransUnion and Equifax. One of the easiest ways to get your credit reports is through AnnualCreditReport.com.

Look through your credit report and verify that all your personal information is correct. If you see any errors, such as a late payment that shouldn’t be there, dispute it with the credit bureau that reported it.

About 25% of people have an error on their credit report
One in five people have at least one error on their credit report, according to a study by the Federal Trade Commission (FTC). One of the most common mistakes is an incorrect account, often a result of identity theft or a company reporting an account on your credit report that doesn’t belong to you. Other mistakes can include wrong personal information, incorrect dates of reported payments and inaccurate balances. Mistakes happen, but you can fix them by disputing them to the credit bureaus.

2. Pay all of your bills on time

It’s easier said than done, but paying everything on time can significantly improve your score. FICO considers payment history the most important factor in determining your credit score — 35% of it. If you have multiple late payments or missed payments, it’s likely pulling your credit score to the ground level.

If you’re struggling to keep up with bills, or you have a lot of credit card debt or personal loans you can’t keep track of, consider things like debt consolidation to reduce the number of monthly obligations you’re keeping track of. Debt consolidation involves lumping multiple loans or debts into one larger loan, usually in an attempt to better organize your finances or save money on interest.

3. Resolve accounts in collections

This is a tough one, but if you have any accounts in collections, it’s likely doing major harm to your credit score. Accounts in collections also play into your payment history, and aside from the damage to your credit score, it’s also likely a red flag for future lenders that review your credit reports.

The new FICO 9 considers the balance of your collections accounts, according to Experian. This means although the negative mark of a collection account may remain on your credit reports for up to seven years, if the balance is zero, it’s better than an unpaid collection account.

4. Use a credit-building product

There are multiple credit-building products specifically designed for low-credit borrowers, such as credit-building loans and credit cards. They’re typically secured, making them easier to qualify for.

For example, Current, a fintech company offering FDIC-insured banking services to over 4 million customers, just released a secured charge card called Current Build.

The card’s spending balance is based on funds tied to its Current Secured Account, which can be automatically topped up as you add money to the account. As you pay down your spending balance, those payments are reported to the credit bureaus. Current reports these payments to TransUnion to help you build a positive credit history and improve your credit score.

The Current Build card has no interest charges, no annual fees and no hard credit check when you apply.

Just remember that if you fall behind on payments, credit-building products can do more harm than good. Only take secured borrowing options if you’re sure you can repay them on time.

5. Keep your credit utilization low

Credit utilization, or your credit utilization ratio, refers to how much you currently owe compared to how much you can borrow. For example, if your credit card has a credit limit of $5,000 and you owe $3,000, you have a credit utilization of 60% — which is high and likely harming your credit.

FICO recommends keeping your credit utilization ratio below 30% to avoid harming your credit score. Credit utilization plays into your amounts owed, which makes up 30% of your total credit score. Check on your revolving credit balances, and if they’re high, work to pay those down to help improve your credit score.

6. Avoid hard inquiries

A hard inquiry — or hard pull — is what happens when a lender requests a copy of your credit reports to determine your eligibility for new credit. Your FICO credit score has a category called new credit, which makes up 10% of your credit score. If you frequently apply for new credit, FICO sees that as risky, as you may be in financial trouble if you’re frantically applying for new credit in a short period.

A single hard inquiry can ding your credit score around five to 20 points. While you’re working to repair your credit score, avoid applying for new credit unless you really need it.

If you apply for the same type of loan with multiple lenders within a short period, like 14 days, only one hard inquiry will impact your credit score. The exception to this is credit cards — each new inquiry will impact your credit score regardless of the timing.

7. Keep your old credit lines open

We’ve covered paying off bills and keeping your revolving credit balances down, but we didn’t say close those old accounts — because that can actually do more harm than good.

Your FICO credit score has a length of credit history category, making up 15% of your total credit score. This category factors in the average length of your entire credit history, and the longer, the better. So, if you have an old, dusty credit card you no longer use, just leave it be. Even though you’re not using it, it’s still factoring in the overall age of your credit history.

An exception to this guidance would be to close an old account if you struggle to keep the balance down or you frequently rack up debt — it might be doing more harm than good.

8. Become an authorized user

If you have a spouse, life partner or family member willing to help rebuild your credit score, consider becoming an authorized user on an existing credit card. The primary account holder of a credit card can add you as an authorized user, which would mean you’d get access to the credit, and it gets added to your credit reports.

Both you and the primary cardholder can benefit from the credit history of the credit card. But if the primary cardholder misses payments or frequently racks up a balance, it can damage your credit score — so you’ll have to ask someone with healthy financial habits.

Compare credit building options

Narrow down top credit-building options by fee, minimum deposit to open and more. For a closer comparison, tick the Compare box to see a few options and their features side by side.

1 - 5 of 15
Name Product Fee Minimum deposit to open Requirements Credit Bureaus Offer
Chime® Credit Builder Secured Visa® Credit Card
Finder Score: 5 / 5: ★★★★★
Chime® Credit Builder Secured Visa® Credit Card
$0 per month
$0
Must have a Chime Checking Account with eligible direct deposits to qualify.
Equifax, Experian, TransUnion
A secured credit card that helps build credit and is designed to work with Chime’s Checking account.
Step Black Card
Finder Score: 4.3 / 5: ★★★★★
Step Black Card
From $0 per month
$0
Step users who are 13 years or older
Equifax, Experian, TransUnion
Safely build credit without a credit check or credit history while earning savings rewards and cashback.
Extra debit card
Finder Score: 4.3 / 5: ★★★★★
Extra debit card
From $20 per month
$0
Requires an existing bank account.
Equifax, Experian
The Extra Debit Card can help build your credit and even offer rewards on every purchase.
Cleo Credit Builder Card
Finder Score: 4.4 / 5: ★★★★★
Cleo Credit Builder Card
$14.99 per month
$1
Requires bank account
Equifax, Experian, TransUnion
A secured credit card designed to help build credit with up to a $500 cash advance
Ava Card ‍Build Credit
Finder Score: 4.2 / 5: ★★★★★
Ava Card ‍Build Credit
From $9 per month
$0
Requires bank account
Equifax, Experian, TransUnion
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5 ways to build your credit score without building debt

How long does it take to rebuild credit?

The answer depends on where you’re starting out in your credit repair journey, but it’s not something that happens overnight.

  • No-credit borrower. If you’re a new borrower and your low credit score results from a lack of credit history, you could potentially boost your credit score within a few months. Getting a secured credit card, staying on top of existing bills and keeping your credit utilization low helps a lacking credit history.
  • So-so credit. If you’re starting out with a credit score in the 500 to 600 range, it can take about a year to build up to the 700s as long as you stay on top of your payments, keep credit card balances low and avoid negative marks.
  • Very poor credit. If your score is in the 300 to 400s, it usually means it’s the result of some big damage, and a full recovery can take years. Things like bankruptcy, charge-offs, multiple missed payments, accounts in collections and repossessions typically remain on your credit reports for up to seven to 10 years, and it can take a few years to fully bounce back.

With each passing year, the impact negative marks have on your credit score decreases with time. But no matter what credit score you have, you’ll have to be a little patient and plan on waiting a few months to see improvement.

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Expert tip: Rebuilding credit after bankruptcy.

Recovering your credit score after bankruptcy is a challenge. If you file for Chapter 7 — the liquidation bankruptcy — it remains on your credit report for up to 10 years starting from the date you filed.

A Chapter 13 bankruptcy allows for a three- or five-year debt repayment plan and stays on your credit report for up to seven years from the filing date. As you near discharge, you're close to when the bankruptcy gets removed from your credit reports, making recovery from Chapter 13 easier than Chapter 7.

A discharged bankruptcy shows you took the time to organize your finances and follow through. To speed up recovery, avoid unnecessary debt, make timely payments and monitor your credit reports. In short, lay low until the damage starts to wear off.

— Bethany Hickey, Editor, Banking.

Factors that make up your credit score

The FICO credit scoring model is the most commonly used model by lenders, so it’s important to know what makes up your credit score when you’re working to improve it. The five categories of your FICO credit score are:

  1. Payment history 35% — This category factors in how you repay credit: on-time payments, late payments, missed payments and so on. This has the most weight, since a lender’s main concern is your ability to repay credit on time.
  2. Amounts owed 30% — This category is more involved, factoring in five different factors: total amounts owed across all accounts, amounts owed on different types of accounts, how many accounts have balances, credit utilization ratio and installment loan balances. In short, it evaluates your revolving credit and installment loan balances to determine your risk.
  3. Length of credit history 15% — A long-standing, positive credit history is important to lenders. This category factors in the average age of your credit history and ages of your accounts. The older your credit history, the better your credit score. This is why closing old accounts can do damage.
  4. New credit 10% — This one concerns how often you apply for new credit. Each time you apply for new credit and the lender performs a hard pull, you see a small decrease in your credit score. A borrower that repeatedly applies for new credit can mean they’re financially overextended or going through financial distress — a red flag to a lender.
  5. Credit mix 10% — This category factors in the different types of credit you have. Successfully juggling different borrowing methods is a sign that you’re a good borrower, which improves your credit score.

Bottom line

Know that you can do everything a credit repair company can do. Improving your credit score can be a true DIY endeavor if you know the steps. The key factors to remember are: pay down credit card balances if you have them, borrow sparingly and pay everything on time to avoid late or missed payments and create a positive repayment history.

If you want to actively improve your credit, a credit-building product like Current Build can help you safely rebuild while taking on more debt.

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To make sure you get accurate and helpful information, this guide has been edited by Holly Jennings as part of our fact-checking process.
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Written by

Editor, Banking

Bethany Hickey is the banking editor and personal finance expert at Finder, specializing in banking, lending, insurance, and crypto. Bethany’s expertise in personal finance has garnered recognition from esteemed media outlets, such as Nasdaq, MSN, Yahoo Finance, GOBankingRates, SuperMoney, AOL and Newsweek. Her articles offer practical financial strategies to Americans, empowering them to make decisions that meet their financial goals. Her past work includes articles on generational spending and saving habits, lending, budgeting and managing debt. Before joining Finder, she was a content manager where she wrote hundreds of articles and news pieces on auto financing and credit repair for CarsDirect, Auto Credit Express and The Car Connection, among others. Bethany holds a BA in English from the University of Michigan-Flint, and was poetry editor for the university’s Qua Literary and Fine Arts Magazine. See full bio

Bethany's expertise
Bethany has written 392 Finder guides across topics including:
  • Personal finance
  • Banking
  • Auto loans
  • Insurance
  • Cryptocurrency and NFTs

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