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Your credit score might have taken a hit if you can’t afford your loan payments or experienced a financial setback. Having subpar credit can be frustrating, as it makes it difficult to qualify for loans and credit cards. Even if you are eligible, you might get stuck with high interest rates and fees.

Fortunately, you can improve your situation and increase your credit score over time. With a good credit score, you’ll be able to access a wider variety of affordable loans and rewards-granting credit cards.

If you’re ready to rebuild your credit score after a money misstep, read on for a closer look at how credit scores work and how to fix bad credit.

Understanding how credit scores work

Credit scores represent the information on your credit report, which contains your history of paying back loans and credit cards, along with other financial history, like filing for bankruptcy.

The three major credit bureaus, Equifax, Experian, and TransUnion, collect this information from your creditors to create your report. Credit scoring companies, like FICO® and VantageScore, use the data on your report to generate your score.

Everyone has multiple credit scores, but lenders commonly look at FICO scores, which range from 300 to 850.1 Depending on your score, lenders might consider your credit to be poor, fair, good, very good, or exceptional. Your FICO score is based on these factors:

  • Payment history (35%): This is your record of paying back your creditors. On-time payments help your score, while late payments drag it down.
  • Amounts owed (30%): Your total debt amount and credit utilization also affect your credit score.
  • Length of credit history (15%): Building a good credit score takes some time, so the longer your credit history, the better.
  • Credit mix (10%): Managing a mix of credit, like installment loans and revolving lines of credit, can positively impact your score.
  • New credit (10%): Applying for new credit can ding your score, though the effect is often short-lived.2

Your credit score can fluctuate frequently based on your payment history, credit card charges, and other factors. A weak credit score can be a roadblock if you want to open a credit card or take out a loan since lenders see it as a red flag that you might not pay your debts back on time. As a result, they might not approve your application or, if they do, charge you high interest rates.

Start building credit with the secured Chime Credit Builder Visa® Credit Card – no credit check required.*

5 steps to rebuild your credit score

While you can’t improve your credit score overnight, there are steps you can take to rebuild your credit over time. You can get your credit score into the good or even exceptional range with discipline and consistency. Here’s how to rebuild your credit score.

Check your credit report

Start by reviewing a copy of your credit report, which you can access weekly for free at AnnualCreditReport.com.3 You can order a report from each credit bureau and get a bird’s-eye view of your accounts and payment history.

Your credit reports can help you identify factors that may be dragging down your score. For example, delinquent accounts and defaulted loans can significantly impact a credit score.

Keep an eye out for errors on your report since credit bureaus don’t always get it right. If you spot any mistakes, file a dispute to try to have them removed.

Make on-time payments on your loans

Making on-time payments on loans can help rebuild your credit score, while late payments will damage it further. Contact your creditors for assistance if you’re in danger of missing payments. They might be able to adjust your payment due dates so they align better with your paychecks or set up an alternative payment plan that works for your budget.

Reduce your credit utilization rate

When you’re considering how to rebuild your credit scores, consider your credit utilization rate. Your credit utilization rate is the amount of credit you’re using compared to what’s available, and it can significantly help or hurt your credit score.

Let’s say you owe $4,000 on a credit card with an $8,000 limit. That would give you a credit utilization rate of 50%. This is a high ratio and could be harmful to your credit score.

To protect your score, keep your credit utilization rate under 30% (the lower the better).4 If a high rate is damaging your score, come up with a plan for getting it under control. Review your income and expenses to determine how to pay down your balances. These money-saving hacks could help, too.

Asking for a credit line increase can also help reduce your credit utilization, but this strategy only makes sense if it doesn’t cause you to spend more. Credit card companies often report your balance to credit bureaus monthly, so reducing your utilization rate could quickly improve your scores.

Set a budget

Creating a budget to manage your money can also help you develop financial habits that will help rebuild your credit. There are different approaches you can use, like the 50/30/20 rule or zero-based budgeting. The main goal is to track your monthly income and expenses and meet your savings and debt payoff goals.

Use Chime’s convenient calculators to help meet your savings goal or figure out how much you need for a loan payoff or credit card payoff.

Consider your goals

Setting realistic goals will help you stay on track when rebuilding credit. Some goals could include checking your credit report once a month, saving a set amount in your emergency fund by the new year, or cutting your credit card balances in half over the next three months.

Once you set your goals, consider the steps you must take to achieve them, like setting aside 5% of your paycheck into savings or paying an $25 extra on your credit cards each month. Make sure your goals are attainable so you don’t get discouraged.

Consider how rebuilding credit will make your life easier, too. Maybe you’ll be able to qualify for a mortgage or open a rewards credit card that gives you cash back or travel points. Having a clear and exciting vision of what you’re working toward can help you stay committed to your goals.

Be wise with your credit cards

Stay up-to-date on your credit card payments while reducing your credit utilization. Pay at least the minimum each month to avoid late fees.

If you can’t afford your credit card payments, contact the card issuer about a hardship or forbearance plan. Be proactive about coming up with a solution before you miss any bills.

Check your finances often

Track your progress as you work to rebuild your credit. Several free credit monitoring services can help you keep tabs on your credit score. Some credit card issuers also offer free features to access your credit scores. Purchasing your FICO scores from myFICO.com is an option, too.

You may need to adjust your spending plan as you go, especially if unexpected expenses arise. Checking in frequently can help you monitor your progress and stay on track toward your goals.

Tips for rebuilding your credit score

Once you’ve taken the above steps to rebuild your score, here are some more specific tips for credit score improvement:

  • Set a plan to avoid overdue bills: This could involve creating a budget, cutting your spending, or starting a side hustle to make extra cash.
  • Pay your bills on time: Make a list of all your loan payments and mark the due dates in your calendar. Consider setting up automatic payments from your bank account so you don’t miss any bills unless you’re worried about overdrafts.
  • Get a secured credit card: These credit-rebuilding cards require you to make a deposit upfront, which acts as your credit limit. The card issuer reports your payments to the credit bureaus. If you make on-time payments each month, you should see your score improve.
  • Consider credit-builder loans: With a credit-builder loan, you make fixed payments to a lender on a set repayment term. The lender reports your monthly payments to the credit bureaus to help your score. Once your term is up, you’ll have access to the loan, which you can turn into an emergency fund.
  • Become an authorized user: Becoming an authorized user on someone else’s credit card can help you improve your credit score as long as the primary cardholder makes on-time payments on their balance. You don’t have to use the card or get a copy, but your credit score could still reap the benefits of someone else’s responsible credit card usage.

How long will it take to rebuild your credit score?

How long does it take to rebuild your credit score? It depends.

Specifically, the amount of time will depend on how severe the issue was and how recently it occurred. Filing for bankruptcy, for instance, can stay on your credit report for 10 years and has a major impact on your score.5

Late payments can stay on your report for seven years, but the impact will fade as you demonstrate responsible credit use.6 Compared to bankruptcy, a single missed payment that happened years ago won’t affect your credit score as much.

Regardless of the issue, negative marks will eventually fall off your credit report over time. You don’t have to wait to start taking action, though, as making on-time payments on your loans, reducing your credit utilization, and taking other proactive steps can all help rebuild your score.

Rebuilding credit is worth the effort

Rebuilding a damaged credit score won’t happen overnight, but you can see a significant improvement over time. Following the steps outlined above is worth the effort – a good credit score makes qualifying for loans and credit cards with reasonable rates and terms easier.

To learn more about the impact of credit scores, check out our guide on why credit scores are so important.

Chime® is a financial technology company, not a bank. Banking services are provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Visa® Debit Card and the Chime Credit Builder Visa® Credit Card are issued by The Bancorp Bank, N.A. or Stride Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit and credit cards are accepted. Please see the back of your Card for its issuing bank.

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Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of The Bancorp Bank, N.A. and Stride Bank, N.A. (“Banks”). Banks are not responsible for the accuracy of any content provided by author(s) or contributor(s).

* To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Chime Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.

† FICO® Scores are developed by Fair Isaac Corporation. The FICO Score provided by ConsumerInfo.com, Inc., also referred to as Experian Consumer Services ("ECS"), in Experian CreditWorks℠, Credit Tracker℠ and/or your free Experian membership (as applicable) is based on FICO Score 8, unless otherwise noted. Many but not all lenders use FICO Score 8. In addition to the FICO Score 8, ECS may offer and provide other base or industry-specific FICO Scores (such as FICO Auto Scores and FICO Bankcard Scores). The other FICO Scores made available are calculated from versions of the base and industry-specific FICO Score models. There are many different credit scoring models that can give a different assessment of your credit rating and relative risk (risk of default) for the same credit report. Your lender or insurer may use a different FICO Score than FICO Score 8 or such other base or industry-specific FICO Score, or another type of credit score altogether. Just remember that your credit rating is often the same even if the number is not. For some consumers, however, the credit rating of FICO Score 8 (or other FICO Score) could vary from the score used by your lender. The statement that "90% of top lenders use FICO Scores" is based on a third-party study of all versions of FICO Scores sold to lenders, including but not limited to scores based on FICO Score 8. Base FICO Scores (including the FICO Score 8) range from 300 to 850. Industry-specific FICO Scores range from 250-900. Higher scores represent a greater likelihood that you'll pay back your debts so you are viewed as being a lower credit risk to lenders. A lower FICO Score indicates to lenders that you may be a higher credit risk. There are three different major credit reporting agencies — the Experian credit bureau, TransUnion® and Equifax® — that maintain a record of your credit history known as your credit report. Your FICO Score is based on the information in your credit report at the time it is requested. Your credit report information can vary from agency to agency because some lenders report your credit history to only one or two of the agencies. So your FICO Score can vary if the information they have on file for you is different. Since the information in your report can change over time, your FICO Score may also change.Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn More

1 Information from the Consumer Financial Protection Bureau's What Is a Credit Score? as of November 2, 2023: https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-score-en-315/

2 Information from myFICO's What's in my FICO Scores? as of November 2, 2023: https://www.myfico.com/credit-education/whats-in-your-credit-score

3 Information from Federal Trade Commission Consumer Advice's You now have permanent access to free weekly credit reports as of November 20, 2023: https://consumer.ftc.gov/consumer-alerts/2023/10/you-now-have-permanent-access-free-weekly-credit-reports

4 Information from Consumer Financial Protection Bureau's Credit score myths that might be holding you back from improving your credit as of November 2, 2023: https://www.consumerfinance.gov/about-us/blog/credit-score-myths-might-be-holding-you-back-improving-your-credit/

5 Information from TransUnion's How Long Does Bankruptcy Stay On Your Credit Report? as of November 2, 2023: https://www.transunion.com/blog/credit-advice/how-long-does-bankruptcy-stay-on-credit-report

6 Information from Equifax's Can You Remove Late Payments from Your Credit Reports? as of November 2, 2023: https://www.equifax.com/personal/education/credit/report/articles/-/learn/remove-late-payments-credit-report

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