What to Do When You Have a Spotty Credit History

What to Do When You Have a Spotty Credit History


While there are many ways you can build strong credit from the start, it can be difficult to recover from mistakes (especially financial mistakes) in the past. Negative marks usually stay on your credit report for 7 years, so it can take time to build your credit back up from a low score.[1] However, that doesn’t mean you’re stuck with having poor credit for the next 7 years. Small steps can help raise your credit score and offer you better future financial options.


Here are a few things you should know:


How to Check Your Credit Score

The first thing you’ll want to do is check your credit score to see what’s knocking down your score. You can request a copy of your credit report from AnnualCreditReport.com for free once a year. This will provide you with your credit report from Equifax, Experian, and TransUnion, the three major credit reporting agencies in the U.S.[2] You can also use services like Credit Karma or Credit Sesame to access your credit score anytime.


What Is a “Bad” Credit Score?

When building your credit score, you’ll need to determine where you are on the credit range. FICO credit scores (the most common type of credit score) range from 300-850. A poor credit score is considered to be anything under 580, while a fair credit score can range from 580-669. Even moving from a poor credit score to a fair credit score can give you more financial opportunities than you may have had before, like better interest rates on loans and access to credit card offers.[3]

How to Improve Your Credit Score When You Have Subpar Credit

Understanding the ins and outs of building credit can seem overwhelming. It can take time to increase your credit score, especially if you have subpar credit or have no credit at all. However, by following a few general tips and being consistent in your approach, you will see your credit score increase slowly.


Pay Bills Promptly

One of the most important things that lenders look for is whether you pay your bills reliably and on time. By paying your bills as soon as you get them, you can ensure that you never miss a due date. Even paying your bills a few days late can result in a negative hit on your credit report.[4] If you’re having trouble paying your bills on time due to high rates, there are a few ways you can negotiate lower bill payments with your provider.


Keep Your Credit Balances Low

Credit utilization is the ratio of outstanding credit card balances to your credit card limit. This ratio can be a significant factor in calculating your credit score. Keeping your credit card balances low, lowers your credit utilization, which can help improve your credit score. When the credit card bill comes each month, you might be tempted to pay the minimum and delay having to repay the full balance. However, not only can this result in costly interest fees over time, but it can cause you to have a higher credit utilization, which can be bad for your credit score. It is recommended to keep your credit balances lower than 25% of your total credit card limit or better yet pay them off all together.[5]


Keep Your Credit Accounts Open, But Don’t Have Too Many

If you’ve got open credit accounts, don’t close them. Even if you don’t use the card, it’s still a smart strategy to spread your spending across multiple accounts in order to keep your credit utilization low. However, don’t apply for or open too many credit cards. Applying for a new credit card may result in a “hard” credit score check, which can temporarily lower your credit score.[6] You’ll also want to be mindful of your spending on credit, and only use what you know you’ll be able to repay on time.


Financial Literacy Definition: What are “hard” and “soft” credit inquiries?

Hard credit inquiry: Also known as a “hard pull”, a hard credit inquiry occurs when you apply for a new line of credit, such as a credit card, a car loan, or a mortgage loan. When the financial institution pulls an inquiry on your record, the inquiry shows up on your credit report. Hard credit inquiries can have an impact on your credit score.


Soft credit inquiry: Also called a “soft pull”, a soft credit inquiry occurs when a company (or even a lender) checks your credit as part of a background check or prequalification. A soft pull may be done on your credit when you apply for a new job or to help a financial institution to determine how much money you may prequalify for in a loan. A soft credit inquiry may not have an impact on your credit score.


Dispute Inaccuracies

A credit score check can also be beneficial in helping you spot any inaccuracies that may drop your credit score. You can use services like Credit Karma or Credit Sesame to access your credit score anytime. Be sure to check your credit reports to verify that all the accounts listed on it are correct. If there’s something inaccurate, you can request its removal by filing a dispute. To do this, contact the credit bureau whose report had the error.[7]


Check to see why your credit score might be low. Did you forget to pay bills on time? Are there cards you haven’t paid off yet? Make sure that all of the information on your credit report is accurate. If there are any inaccuracies, be sure to report and dispute them. This can help you start rebuilding your credit.[8]



By following these tips and regularly performing a credit score check, you can work towards getting your credit to where you want it to be and improve your financial security.



[1] https://www.equifax.com/personal/education/credit/report/how-long-does-information-stay-on-credit-report/#:~:text=Generally%20speaking%2C%20negative%20information%20such,reports%20for%20approximately%20seven%20years.

[2] https://www.wellsfargo.com/financial-education/credit-management/check-credit-score/

[3] https://www.nerdwallet.com/article/finance/fair-credit-score-good-credit

[4] https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/improve-credit-score/

[5] https://bettercreditblog.org/utilization-maintaining-the-right-credit-balance-to-limit-ratio/

[6] https://www.nerdwallet.com/article/finance/how-many-credit-cards

[7] https://www.experian.com/blogs/ask-experian/credit-education/faqs/how-to-dispute-credit-report-information/

[8] https://www.experian.com/blogs/ask-experian/credit-education/faqs/how-to-dispute-credit-report-information/