Ultimate Guide to Fixing Bad Credit
I used to have bad credit. Like, really bad credit. In fact, I had a score in the 400s for years. I wasn’t able to get a credit card, a car loan, or let alone a mortgage. My reckless actions of the past made it impossible to get any sort of credit. Over the next few years, I decided I was going to fix my credit and get back on the right path. It wasn’t easy, but today I have a score that fluctuates around 750!
I learned a lot of things a long the way, and I decided to combine the knowledge I accumulated into a free guide and give it away to people who were in my position. If you have bad credit, no credit, or want to improve your score, this guide is for you.
Follow the instructions in this guide and I guarantee you will improve your score by 100 points in 30 days!
Step One: Set up Credit Tracking
The very first thing you need to do if you want to fix your credit is establish a baseline so you can track your results. Now, there is a big difference between checking your credit score on Credit Karma (which is 100% free) and getting a real three bureau report. Credit Karma (and other free tools) don’t actually pull your credit reports. They use data provided by public records to give you an estimated score, which can bee 100 points different from your actual score. Also, if you make some serious changes to fix your credit, Credit Karma won’t update until 3 to 6 months later.
Pulling your real reports with real scores directly from the bureaus is the way to go. I recommend Free Credit Click since they have a free trial for 7 days. I recommend using the service monthly to track your results. A good credit score will save you over $100,000 in your life time, and on the same token a bad one will cost you. It’s important to know where your score is and be able to measure your results. Remember you really only need the tool for 30 to 60 days while you are building your score.
Step Two: Establish Credit
The very first thing you should do once you have your scores in hand is build two to three credit sources. Doing this will immediately build your credit score, and for some people that’s all they need. You want to have multiple cards that all report each month. Two to three cards is perfect to get you where you need to be.
“But I have bad credit and can’t get a card…”
There are a few cards that are 100% guaranteed approval and will report to the credit bureaus. These cards are not great in terms of interest rates and rewards, but the important thing is that you don’t have to keep them forever. You just need them long enough to fix your credit score. Once your score increases, you can switch them out for a better card with rewards and a low interest rate. Apply for these three cards and move on to step 3.
– Great card with a guaranteed $500 limit and instant approval. No credit check!
– Another good card. $1000 limit with instant guaranteed approval. No hard pull!
– $1500 limit with 0% intro APR. You won’t find a higher limit than this. Also a guaranteed approval for all credit types.
Now that you have three lines of credit, move on to step three for another HUGE boost.
Step Three: Remove Negative Marks
A big reason why your credit score is bad could be due to derogatory marks on your credit report. Any time you have an unpaid bill, collections account, or hard pull, your credit score takes a big hit. Sometimes your score can be down 100 points just due to derogatories!
The good news is that you can remove these through a process called “direct dispute”. Basically, the credit agencies have to prove that the debt is yours in order for them to keep it on your report. By challenging the legitimacy of the derogatories, the credit bureau has 30 days to respond.
A lot of the times it takes them more than 30 days to verify that the collections account is real, and they are forced to remove it by law. Sometimes they lose their records and can’t actually prove that you own the debt.
Credit repair has great success. When I hired Lexington Law to do my disputes for me, I had 13 of 16 negatives REMOVED off of my accounts just in the first 30 days. The remaining 3 I paid with my new credit cards and the end result was a squeakly clean credit score.
You can always do the disputing process yourself, which requires sending one letter for each negative, and you have to send that letter via certified mail to all three bureaus. The problem with this is that most people have 10 to 20 collection accounts. Let’s say you have 15 negatives:
15 Letters X 3 bureaus = 45 letters sent via certified mail (PER MONTH)!
That can get expensive, and a lot of the times your results are much worse when you try to dispute yourself.
I found great success by hiring Lexington Law to take care of this process for me. I did a free consultation by calling (844) 259-3564 and they gave me an idea on how much they could help me. After my first month in the program, I had most of my negatives removed and I cancelled. Easy peasy!
Whether you hire a company or do them all yourself, getting negatives removed from your account is a MUST if you want good credit! Do not skip on this step! You will thank me later.
Step Four: Better Card, Better Credit
By this time, you have increased your score nearly 100 points in 30 days. Your credit score has gone up and your negatives have been removed. It’s time to apply for a real card!
I recommend the Total Visa card, because they work with people who don’t have spotless credit and they give you regular credit limit increases. This was the card that solidified my good score and got me another 50 points added so I could get a rewards card and collect miles.
I like to recommend that people apply for this card after 30 days of building your score with the other cards, since this one is a hard pull on your credit. For people like me, this was the first real card I was ever approved for! It was such a great feeling to see that approval screen, I still remember it.
Step Five: Enjoy it!
You now have fantastic credit, and it’s only been a few months! Keep using your Total Visa and once they offer you a credit limit, you should be good to go to apply for a tier-1 card.
Remember to always pay your bill and don’t apply for more cards unless you’re ready for the hard pull! Thanks for reading my guide and best of luck 🙂