Tips on Repairing a Weak FICO Score


The importance of a good credit score

The importance of a good credit score


Understanding your credit report, and resulting FICO score, is important; repairing a weak one is crucial to your future ability to qualify for any type of loan, buy a car on credit, rent apartments or homes, or participate in any transaction requiring financing or proof of financial security.

How do I know if my credit report needs repair?

In 2003 President Bush signed into law the Fair and Accurate Credit Transaction Act.  One of its provisions required each of the 3 major credit bureaus (Experian, Equifax, and TransUnion) to provide consumers free access to their credit report every 12 months on request.  By applying on line at, or calling them at 1-877-322-8228, you may order free reports from each of the three bureaus at the same time, or you can stagger your requests throughout the year.  The reports are lengthy summaries of all accounts you have established with lenders, such as credit cards, car loans, student loans, and mortgages. Your lenders have supplied information on the date that each account was opened, the loan/balance amount, and payment histories.  As for the resulting FICO score, the bureaus are not required to give free access; by going to FICO’s website, and paying around $20, you can also order your FICO score.

Is a credit report difficult to read?

Each account on your credit report has a rating.  A sample credit report will be provided to assist you with reading your report.  You will see a letter indicating what type of account (I for individual, J for joint, etc.), followed by a number signaling the rating; a ‘1’ would be an account paid on time, while a ‘5’ could mean a late payment.  Make a note of all accounts with numbers higher than ‘1’,  and especially any that were turned over for collection… definite repair items.

If you discover a number of negative items on your credit report that are accurate, there are steps you can take to remediate your credit standing.  Repairing bad credit is a bit like losing weight; it takes time and there is no quick fix.

How can I repair my negative credit history?

1)       Pay on time!  Your payment history accounts for 35% of your credit score, and is the first thing lenders and landlords consider.  Set up payment reminders, or arrange for direct automatic deductions from your bank account and direct debits to a credit card.  Select 2 days a month to sit down and pay any accumulated bills all at once.

2)      Create a monthly budget. Track your spending for 30 days to calculate your income and expenditures, budget for those fixed expenses, and leave money for non-recurring and miscellaneous expenses.

3)      Stop using your credit cards so much.  If your credit card balances grow, and you’re only paying off the minimum each month, stop using it!  Try existing for a while on cash or a debit card, while paying down those large balances.  Constantly using more than 35% of your card limit is a red flag to creditors; try to keep usage under 20%.

4)      Don’t open a lot of new credit cards.  Too many new accounts will lower your average account age and therefore lower your score, while a long credit history with at least 3 “trade lines” or credit cards raises your score.  With that said, don’t close unused credit cards as a short-term strategy to raise your score; closed accounts still show up on your report, and canceling a credit card can drop your score by 30 points or more.  Lastly, don’t open charge accounts or credit cards with department stores; stick to established bank cards.

5)      Reach out to your creditors.  If you are surprised (or not) to find accounts that have been turned over for collection, and the charges are correct, contact the collection agency and ask them to accept a payment plan that will fit your budget.  If you have a budget, and can show how much you can pay each month against the debt, they’re more likely to accept your offer of lower payments.  Once you have paid a collection debt in full, ask for a settlement letter from the collection agency, and send a copy to all 3 credit bureaus so they can update your report.  Even though you pay off the collection account, it will stay on your credit report for 7 years but will be reflected as paid.

6)      Pay down some of your larger debts.  Total debt outstanding constitutes 30% of your credit score.  With close budgeting, consider opening 2 bank accounts…one for everyday expenses and one to be used only for making debt repayments each month.  Focus on making payments on the highest interest debt first.

7)      Seek help from a credit counseling organization.  If you’re not having luck creating a budget or working out repayment plans with a creditor, you might consider finding a reputable organization that offers in-person counseling.  Some are free non-profit organizations, and some charge.  Beware of claims for quick fixes, “erasing bad credit”, or removing negative items from your credit report with requirements to pay in advance…they’re very likely signs of a scam.

What if I find an error on my credit report?

If you discover negative items on your report that are inaccurate or incomplete, you should take steps to have them removed:

**Tell the credit bureau, in writing, what information you believe to be inaccurate.  Clearly identify each item, and include copies of any documents to support your claim.  State the facts and reasons you dispute the information