I have really poor credit, how can I begin to fix it?

Credit Q&A

Question

I have really poor credit, how can I begin to fix it?

Answer

A good credit score can take years to build but if you are diligent about following these steps you should start to see results in a few months.

Avoid any new derogatory actions. Each new delinquency, collection, lien or charge-off on your credit report will affect your credit score for years to come. Often the only way to compensate for these negative attributes is with time. Avoid these actions by limiting your spending or restructuring your debt. Restructuring may be difficult with a low score so it is best to avoid the debt in the first place.
Don't take on any new debt. Your debt load is a significant contributing factor in your credit score. The first step in eliminating debt is to stop accumulating new debt. This means having the will power to reduce spending on non-essential items. We understand this can be a very tough step, but it has long lasting effects on your credit score.
Plan a budget to get out of debt. After reducing new debt, paying down your old debt is often easier. The best strategy is to make a budget and stick to it. Create a monthly budget of your income and expenses including a reasonable plan to pay down all your debt. As always, start with paying more towards the credit with the highest interest rate first.
Build a good payment history with responsible credit usage. Credit cards are not evil if you are responsible and they can be a great convenience if you have restraint. If you don’t have any credit cards, apply for a credit card designed for people with poor credit. Often these cards will have high fees (this is a cost of having poor credit). With this new card, use it once or twice a month on essentials and pay it off in full each month. Demonstrate responsible credit usage, develop a strong payment history, and stop taking on more debt. These are some recommended credit cards for people with poor credit if you need help.

If you don't think you have the restraint to spend responsibly, then skip this step and stick to cash or debt cards.

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USER COMMENTS(111)

janet646
Nov 18
11:43 am

My credit score right now is 533 but I am looking to buy a home soon. Will some banks still consider me for a home loan?

CK Moderator

This is a very poor score. We do not know any mortgage lenders who operate in this credit range.

scastonguay
Nov 14
11:34 am

I had an American Express Card for nearly 20 years and have never been late with payments (on any accounts). However, last year I was laid off and it became increasingly more difficult to keep up with timely payments. 2 months ago AMX reduced my credit line from $30,000 to $300 due to my credit score declining from 740 to 510! Will I ever be able to reinstate my credit with AMX again?

CK Moderator

Credit card companies usually have short memories. With a high credit score, Amex will probably approve you again.

vwaggin84
Nov 13
7:06 am

CK Moderator,

Under my average age of credit cards there looks to be a missing card I opened up over 8 years ago. It shows my oldest tradeline as around 5 years.

Any advice on how to have this card added to the credit reporting agencies?

Thanks

CK Moderator

Not all lenders report to all bureaus. First you should call to determine if the omission was an oversight or that they do not report to TU. In the latter situation, there is not much you can do.

paulXC
Nov 11
3:57 pm

Hey CK Moderator, thanks for your insights.

The collection account will now be marked as paid. Will that help? My Percent of On-Time Payments is XX that gives me a "B" so that doesn't seem like the biggest drag. Altho it is obviously quite some drag.

I got an "A" with 10 Years 4 Months Average Age of Open Credit Lines

I went back and looked at credit report card and see the score factors:

Open Credit Card Utilization is worth a "C" but paying that down doesn't raise the score up much.

Hard Credit Inquiries give me a "C" that passes relatively quickly doesn't it?

Total Accounts give me a "C" Should I be opening or closing accounts?

CK Moderator

For security reasons, I deleted the specifics from your post. To answer your question, even if you are current the delinquency is still a negative mark. As for the other grades, try to move them towards an A. For example, unless you recently bought a home, you have too many inquiries. Hope that help.

stacychalk
Nov 11
7:55 am

I have a credit score of 635 and $18,000 credit debt, and most of my interest rates are 25-30% now. Should I consider debt repayment plan or can I turn this around with credit counseling or sticking to a strict budget my self. I am afraid that it is too bad at this point, with the high interest rates and all the payments i have to make each month I may not be able to get anywhere on my own.

CK Moderator

Tough call. $18,000 isn't too bad compared to the general debt we see. While it seems insurmountable, you can do it by yourself with a budget. It is not easy but you need to determine what you really need and the put the rest of towards the debt. Perhaps others have more advice.

staciepedraz
Nov 8
7:13 pm

I just filed for a Chap 13 2 mon ago. My score is 530, what can I do to get it higher. And how long does it usually take?

CK Moderator

It will take a few years to increase your score. Just remember that many lenders have BK filters so you may still get several declines regardless of the score.

irodriguez33
Nov 6
9:37 am

Hello- most of my debt is old and either charged off; closed or something else. Says most of it should fall off in a year or two..... In total my debt is 7,000 in the bad credit portion....what should i do.

CK Moderator

Sounds like you just need to make sure you pay off your bills moving forward. If you need help building your credit consider Orchard Bank or Public Savings Bank.

mylissa
Nov 5
8:08 pm

I have an IRS lean against my credit,

how can I fix this.

CK Moderator

If the lien is accurate, you need to pay it if you want it off your credit report. If it is inaccurate, you can dispute it by contacting the IRS.

paulXC
Nov 5
11:12 am

I had a 615 and comcast went to collection for $100 that I thought I had made payment arrangements for. Somehow that brought me to 582.

Nothing simulates a big increase in points even back to 615.

I tried pay off all debt. My on time score and oldest accounts are 98% and 11 yr average.

CK Moderator

At 98% on-time payment and with a collections account, your credit may suffer for some time. On-time payments are the most important elements of a good credit score. Missing some will affect your score for years to come. The best thing to do now is to pay 100% on-time going forward.

niyosha75
Nov 5
10:54 am

I have been using credit karma for about 6 months and my credit increased from 630 to 654. In August 09 I noticed a huge jump? Not sure why? The past 2 months I have been very diligent about paying off my credit cards, i pay lump sums and my debt is coming down. I have 99% on time payments. I am trying to pay them off in full by December 09. But I have had no credit score increase since August? Why is this. In December when I pay off 4 cards and close 2 down, will this increase my score?