If your credit isn't what you'd like it to be (whether you're above or
below the median FICO score of 723), there are steps you can take to
improve your score. If you are diligent and patient, taking these
steps to improve your credit score will help you qualify for better credit
deals and secure lower interest rates. These lower rates could save
you big money in the long run.
Where you start depends on what your current debt situation is.
If you're struggling right now to pay your debt obligations, there are
five immediate steps you will need to take:
- Face up to the problem. Admit that you are in over your head,
that you can't pay your debts, and that you need help.
- Stop purchasing with credit. Continuing to rack up more debt,
even as you default on other debts, will make your situation worse.
If you use credit cards, put them in a place where you can't get them or
cut them up. Don't close the accounts, but do stop spending on
- Seek help from a trustworthy, unbiased source. You may
eventually choose to hire a debt consultant or credit counselor, but
first seek help from someone who's not in it for financial gain (such as
the Federal Trade Commission or the
National Foundation for Consumer Credit.
- Negotiate. Call your creditors, or seek help from a credit
counseling agency that will negotiate with your creditors for you.
- Consider debt consolidation. Debt consolidation can be an
effective way to reduce your current monthly payments without defaulting
on your obligations.
If you decide that you need help negotiating with your creditors or
consolidating your debt, check out this government website that will
point you toward
approved credit counselors.
If you're not stuck in the month-to-month debt trap, but would like to
improve your score, follow these three steps:
For more information about resolving credit problems, read the
debt consolidation article on this website.
- Be patient. Over the process of time, if you always pay your
debts punctually, your credit score will rise — even if you
don't take any other steps to improve it.
- Pay off (or pay down) your debt balances. If you have the extra
cash — whether from equity in your home or your annual bonus, use
that money to pay down your highest-interest debt balances. The
less debt you have, the better your score will be.
- Use credit wisely. If you can manage it, use credit to pay for
regular monthly purchases, like groceries and gas, and then pay off your
credit card every month. That way, you can build a positive credit
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Fixing Bad Credit