How to Fix Terrible Credit

Poor financial decisions in your early 20s lead to terrible credit and a low credit score in your late 20s and early 30s, just when you need excellent credit to get a decent mortgage or car loan. You can fix your terrible credit with some effort and some time. Repairing your credit is not an overnight process. Usually, you can do it yourself, though you may need the assistance of a counselor if setting a budget or paying your bills proves to be a challenge.

Items you will need

  • Credit report
  • Computer with word processing and spreadsheet software

Review your credit report. You may obtain a report from each of the three major reporting agencies once a year for free. It may be that your low credit is due to an error on the report, which you can fix. Send a letter to the credit reporting company, explaining exactly where the error is. The report may say that you have missed payments when you haven't or may even have an account listed that is not yours. If the poor credit is not due to an error, you must be able to see what the problem is, such as late payments on a credit card.

Make up any missed payments on credit cards or other accounts. Pay any past-due amounts over a period of a few months to improve your credit score.

Avoid closing any accounts. Even if you do not use a credit card, leave it open. Closing accounts shortens your credit history, which can make your overall credit look worse than it is. If you leave accounts open, it also improves your debt to credit ratio. For example, if you have a $1,000 balance on a credit card with a $4,000 credit line, and a $0 balance on a card with a $6,000 credit line, you have a 10 percent debt-to-credit ratio. If you close the $6,000 credit card, your ratio jumps to 25 percent.

Keep any balances on your credit cards low. Once you have paid off most of the balances on your cards and brought your payments up to date, strive to pay your balance in full before the due date each month. Use your cards only occasionally and aim to use -- at most -- between 10 percent and 30 percent of the credit line. Avoiding the use of credit cards all together will not necessarily help you to improve your score. You must show creditors that you can use credit responsibly and that you can make payments on time.

Stick with the credit you have for now. Opening a lot of new credit cards or other accounts can sink your score, especially if you are new to credit. Obtain a new credit card or apply for a loan only when it is absolutely necessary. Resist the temptation to open a line of credit with a particular retailer.


  • Be wary of companies that promise to magically improve your credit. Some companies charge you a lot of money and do not actually do anything that helps you. Others may try to persuade you to file for bankruptcy, according to the FTC. Bankruptcy may be some people's only option, but the cost is steep. A bankruptcy stays on your credit history for 10 years.

About the Author

Based in Pennsylvania, Emily Weller has been writing professionally since 2007, when she began writing theater reviews Off-Off Broadway productions. Since then, she has written for TheNest, ModernMom and Rhode Island Home and Design magazine, among others. Weller attended CUNY/Brooklyn college and Temple University.