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A little over a decade ago, I found myself in especially dire financial straits. I got laid off from my job, split from my spouse, and defaulted on the mortgage for the house I shouldn’t have bought.
As a result, my credit score tanked. Having a low credit score means not qualifying for the best credit cards, struggling to get approved to rent a home, and even paying more for insurance.
Here’s how I rebuilt my credit — and how you can do the same.
I focused on making on-time payments
Getting out of the credit score hole took time, so I had to start with what I had. It ended up taking me more than a year to get a new job, but as soon as I had unemployment pay coming in, I put step one of my plan into action. I vowed to pay every bill on time, every single month.
Payment history is the largest part of your FICO® Score, accounting for 35% of it. But building a positive payment history takes time, so if you don’t have the income available to pay down what you owe, just paying your creditors on time every month will slowly improve your credit score.
In my case, it took almost another decade before I was able to get my finances to a place where I wasn’t carrying any debt at all (more on that below). But I managed to get my score back above 700 thanks in large part to those on-time payments.
I didn’t apply for new credit
My other key move over several years of attempting to improve my credit score was avoiding new credit applications. Adding new accounts to your roster is a double-edged sword. Getting a new credit card boosts your available credit, thereby reducing your credit utilization ratio (30% of your FICO® Score).
But applying for new credit dings your credit score by a few points every time you do it. So if you’re trying to improve your credit, it’s a good idea to take a break from it. Once your credit is in better shape, you can apply for that travel credit card you’ve got your eye on.
I used extra income to pay off debt
After many years of living paycheck to paycheck and slowly sinking deeper into debt, I changed careers in 2021, and started looking for ways to grow my income.
The most effective way to do this for me was to take on a side hustle, so I sought one out. I am fortunate enough to now be in a field that allows for remote work, and living alone (well, with cats) means I had more free time than the average person with a spouse and kids.
My search led me here to The Ascent, where I’ve gotten to flex my writing and editing muscles. And working extra hours on top of my full-time job put me in the position of being able to pay off all my debt within eight months.
As a result, I found myself with a credit score over 800 — and 100 points higher than I’d started with.
How many points can you add to your credit score?
Here’s where I acknowledge that you likely can’t boost your credit score by triple digits in such a short period, unless you’re fortunate enough to also make the same moves I did.
That said, any amount of improvement could mean paying less to borrow money — especially if you were on the cusp of moving from one credit score tier to the next one up.
Focus on these moves to start your own credit improvement journey.
Review your credit reports
You can access these for free from AnnualCreditReport.com. Look for errors that could be dragging your score down, like late payments you didn’t make or credit accounts that aren’t yours.
More than a quarter of Americans have serious mistakes on our credit reports, according to Consumer Reports. You can dispute them with the credit bureau and have them removed.
Make on-time payments
It doesn’t get any easier than this, provided you can afford your bills. I was very lucky in that while I had very little money left over for all those years, I was able to pay everything on time and in full every month.
If it’s hard to remember when bills are due, set up smartphone calendar alerts, opt in for auto-pay, or do what I do — write all your monthly bills on a paper wall calendar and cross them off as you pay them (I’m kind of old school).
Pay down debt
This is hugely impactful for your credit score — credit utilization is 30% of your FICO® Score. If you don’t have a ton of money left after your regular bills are paid, taking on a side hustle is an excellent way to pay off debt, if you can manage it. Minus taxes, everything you earn can go toward debt payoff.
Credit score improvement takes time — I share my experience here not to tell you that you can replicate my exact results, but to encourage you to take the first step.
See where your score stands, dispute credit report errors, make on-time payments, and roll extra cash toward debt payoff. A journey of 1,000 miles (or 100 credit score points) starts with a single step.
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