Help! I Can't Fix My Bad Credit

You’ve actively tried to improve your credit. You’ve pulled your free credit reports, checked for errors and identified what was holding you back. But even though you’ve instituted some good behaviors, like addressing that old collection account or making minimum payments on your credit card account, your bad score just won’t budge. What should you do next? Here are a few options.

1. Give It Some Time

Bad credit is often the product of some pretty big missteps, like a bankruptcy, foreclosure, judgment or default. And that negative information is going take some time to age off of your credit report. Their effects will, however, lessen over time, so if you continue to focus on the basics (like making payments on time and keeping balances low) your score should ultimately start to climb. You can monitor your progress by viewing your free credit report summary every month on Credit.com.

2. Review Your Budget

Addressing a major derogatory item — like paying a long overdue collections bill — is a great first step to getting your credit out of the gutter, but your score isn’t going to improve dramatically unless you also fix the issues that were causing you to miss payments and run up big balances in the first place.

“Look at your budget and see if all the bad activity [is] really behind you,” said Martin Lynch, director of education for Cambridge Credit Counseling Corp. For instance, if you’re still overspending, “that prevents you from knocking down balances as effectively as you could,” he said.

3. Look Into Some New Starter Credit

Improving credit isn’t just about removing the negative — you also might need to add some new positive information. Getting new credit to demonstrate proper payment behavior might seem impossible, given the state your credit is in. But there are certain types of financing out there that are designed to help borrowers rebuild. You could, for instance, consider opening up a secured credit card or a credit-builder loan from your local bank or credit union, Lynch said. Making on-time payments on these loans for around six months should help you score, he said. (Just be sure to carefully read the terms and conditions associated with any financing you are considering, since subprime credit lines may have fees or higher interest rates.)

4. Consider Collateral Damage

Credit scoring is admittedly complex, and there are certain steps a person looking to improve their credit may take that could actually send their score in the wrong direction. For instance, you may feel inclined to close an old credit card account that you finally paid off. But the closure could wind up negatively skewing your credit utilization rate (essentially how much debt you are carrying versus how much credit has been extended to you) and hurt your score, Lynch said — at least until you add new credit or pay other high credit card balances down. That’s not to say closing the card isn’t in your best interest. (It can be the right move if you don’t trust you’ll refrain from running up a new balance you can’t afford.) But it does mean that you need to consider all your credit-related moves very carefully and do some research before making them.

5. Get Some Help

If it’s already been a while or your bad credit is a result of problems you have little control over (such as identity theft or credit report errors), you may want to consider consulting a professional, like a credit repair company, consumer attorney or credit counselor. Just be sure to thoroughly vet anyone you are considering doing business with, as not all companies out there have your best interests at heart. A good credit repair company will explain exactly what it can and cannot do on your behalf and will never guarantee a “100-point rise in your credit score.” (You can learn more about credit repair here.)