Many Americans don’t. In 2020, more than 30 percent had a credit score below 670, which is defined as “fair” or “poor,” according to credit bureau Experian. (Scores above 670 are considered “good” to “exceptional.”) The good news: If you’ve struggled with your credit, it’s never too late to do something about it. “Your credit is not a terminal illness,” says Katie Bossler, quality assurance specialist at GreenPath Financial Wellness. “It’s very fixable.” Many people feel shame over their credit, she says, but often your credit takes a hit because of something outside your control, such as excessive medical bills, rather than just overspending or carelessness. Plus, most Americans lack education on how to manage their credit, Bossler adds; more than 50 percent of millennial women said they were never taught how to manage credit, according to a Credit Sesame survey. “But, it’s never too late to learn it for the first time—or repair it,” she says. Here are six ways to rebuild your credit. Errors, including bills that aren’t yours, sometimes appear on the report. If that happens, you can dispute them through the credit bureaus, Bossler says. Get into the habit of checking your credit report regularly. “Paying your bills on time is probably the number one thing people have to really get used to doing,” says Jake Guttman, founder and CEO of Rosevest Financial. “It’s a really important factor in proving your worthiness to borrow with credit reporting agencies.” When you pay bills on time, you build confidence with lenders and show that you’re able to pay back loans, he says. If you’ve missed payments in the past, don’t worry, just start paying on time now. Credit scores focus more on recent activity from the last 12 to 24 months, Bossler says. “So if you were late last month, that’s going to hurt your score more than if you were late two years ago,” she adds. If your credit utilization reaches 30 percent, it could harm your credit, even if you pay it on time. “You should work towards getting those balances down if you’re using more than 30 percent,” Bossler says. Don’t be afraid to use your credit card—just avoid making big purchases that you can’t afford and pay as much as you can each month to keep your credit utilization as low as possible, Guttman says. “The purpose of this loan is to build your credit, because you’re not actually getting that money at the beginning,” Bossler says. “You’ve got to pay for it first.” Credit builder loans help build a credit history and show that you can make payments on time, Guttman says. Just make sure the financial institution lending to you reports to the three major credit bureaus: Experian, Equifax, and TransUnion. Some smaller banks don’t, Bossler says, and “you need something reporting to the credit bureau that shows that you can manage credit properly.” “Much like a credit builder loan, you’re proving your ability to pay this back over time,” Guttman says. At the end of the term, your security deposit will be refunded, and you might be able to transfer the account to an unsecured credit card, which usually comes with lower interest rates, better terms, and rewards. Some secured credit cards have fees, Bossler says. Also, make sure the credit card company reports to the credit bureaus so that it shows up on your credit report. Sometimes credit repair agencies dispute all negative aspects of your credit report, even if they’re accurate. Since credit bureaus have 30 days to investigate disputes, the items won’t appear on your credit report during that time. Bossler says this can temporarily boost your credit score, but if disputed items are found to be accurate, they’ll reappear on the report, lowering your score. “I would encourage someone to really dive into those deeper issues that caused the situation and think through what will help them long term,” she says.
