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How to Rebuild Credit: A DIY Credit Repair Guide

10 min read
By Sean Messier
Expert reviewed by Michelle Lambright Black
Updated Aug 31, 2020
At a glance

Rebuilding credit yourself requires a great deal of time and effort. However, by paying off debts and building new credit responsibly, you can overcome past financial mistakes to work toward great credit.

Damaged credit history and poor credit scores can throw a big wrench into your financial life.

You’ll have more difficulty obtaining loans and credit cards than people with good credit. If you do get a loan or credit card, you’ll usually pay a higher interest rate than people who have higher credit scores. You also won’t be eligible for credit cards with the best rewards and benefits.

However, if you have bad credit, don’t despair — there are several practical ways to begin reversing your situation and put yourself on track toward good credit.

There are six key steps involved in repairing your credit:

  1. Assess your credit situation.
  2. Dispute inaccurate credit report information.
  3. Pay down debts.
  4. Learn about responsible credit habits.
  5. Build new credit.
  6. Wait.

You may be able to skip a step or two, depending on your situation. Even so, it’s wise to understand the full process in case unexpected financial troubles come up again in the future.

Step 1: Assess Your Credit Situation

Before taking action to improve your less-than-stellar credit, check your three credit reports and scores. You need to identify why your credit scores dropped in the first place.

You probably already have a good idea of what happened, whether you missed credit card payments or defaulted on a personal loan. Regardless, taking a comprehensive, honest look at your financial situation is the first step on the path toward great credit. It also presents a valuable opportunity to identify and dispute incorrect information that could be hurting your scores.

Here’s an idea of how you should go about this step.

  1. Check your credit scores: You should be able to check a credit score for each of your reports for free. You may be able to view a score through your credit card. If not, many online services let you access a free credit score by simply signing up.
  2. Examine your credit reports: Under federal law, you’re allowed one free credit report from each major consumer credit bureau — Equifax, Experian, and TransUnion — every 12 months. You can get your free reports at While your credit scores offer helpful insight into your situation, credit reports provide a detailed picture that should make it easier to find the exact problems at play. Make a list of any potentially negative information you find, including late payments, collection accounts, inquiries, and credit cards with high balances compared to their limits.
  3. Create a plan of action: Once you’ve looked through your reports to determine what you need to work on, browse through the steps we’ve outlined below, and address each issue with the appropriate solution.

If you think you’re in too deep to figure everything out on your own, consider credit counseling. Credit counselors provide credit-related guidance that could prove invaluable in helping you navigate the murky waters of debt. Check the U.S. Department of Justice’s official list of approved credit counseling agencies to locate counseling services near you.

Insider tip

A reputable credit repair company may be able to help. The National Association of Credit Services Organizations (NACSO) is a good resource to help you find accredited members in your area.

Step 2: Dispute Inaccurate Information

If you find any inaccuracies while you’re digging through your credit reports, you have the legal right to dispute them. When you dispute an account, the credit bureau has to investigate and delete the item from your credit report if it isn’t verified as accurate.

A deletion could boost your credit scores in certain cases, if the removed item was negative. But even if a deletion doesn’t improve your scores, it’s still important to ensure that all information on your reports is accurate.

For example, a positive mortgage account that doesn’t belong to you might not hurt your credit score. But it could make it hard to borrow in the future because, on paper, it looks like you owe more money than you do.

Disputing an item on a credit report is pretty simple. Start by determining which information is inaccurate. Then, determine which credit bureau is reporting the errors. Finally, follow these steps.

  1. Send a 609 dispute letter by certified mail (return receipt requested) to the appropriate credit bureau. Request verification of the information you think is wrong. Your dispute won’t guarantee a deletion of the information, but it does require the bureau to make an accuracy check.
  2. Wait for a response. The process could take a month or more. After the investigation, the bureau should remove the erroneous information from your credit report if it can’t be verified.
  3. If your dispute didn’t reach the resolution you were hoping for, you have more options. You can follow up with the bureau, contact the creditor that furnished the data, submit a complaint to the Consumer Financial Protection Bureau, or even speak with a consumer protection attorney if the situation demands it.

If you actually found entire accounts you don’t recognize on your credit reports, consider reporting the incident to the FTC, and take careful measures to help prevent issues like identity theft in the future.

We recommend credit monitoring, even if you found nothing out of the ordinary on your credit reports. Credit monitoring services alert you of changes in your credit reports, helping you identify fraudulent accounts and unauthorized credit access. Many credit card companies provide cardholders with complimentary credit monitoring services, or you can sign up for free services like Experian’s CreditWorks Basic.

If you’re worried about fraud, you may also want to freeze your credit reports to prevent applications for credit in your name until your reports are thawed. All three major credit bureaus must provide freezes for free.

Credit locks are another option. They’re similar to freezes, but may have more convenient features, like instant locking/unlocking capabilities. These features may come for a fee, however.

Insider tip

Disputing information on your credit reports takes time. You can undertake the process by yourself, or you can look for help from a credit repair company. Just be sure to research your options at length to make sure you’re working with a legitimate agency. Also, remember that you’re paying someone for a service you can try to manage on your own (like filing taxes or changing the oil in your vehicle).

Step 3: Pay Down Debts

Paying down your existing debts is simultaneously one of the toughest and most important elements of the credit repair process. It’ll nearly always take a lot of time, effort, and (of course) money. But once you make peace with your debts, you can lay a foundation for future stability.

The amount of debt you owe (especially your credit card utilization) accounts for 30% of your FICO Scores. Paying down credit card debt is often a very effective way to improve your credit scores.

Ready to get started? Here are a few debt elimination options.

Pay Outright

If your debts are still current or just a little behind (meaning you have haven’t gone into default yet), you may be able to come up with a plan to start reducing your balances. This may stop the bleeding before your credit situation gets out of hand. Often, you may simply need to adjust your budget and prioritize your debts differently.

Consider your credit card balances, for example.

Making only the minimum monthly payment on a credit card, it could take you years to whittle the balance down to zero, depending on the size of the debt. That’s why you should try paying card balances down on a monthly basis, or as quickly as possible otherwise.

Quick Guide

Two Popular Debt Repayment Methods

Consider tackling your debts via tried-and-true repayment methods like the debt avalanche or the debt snowball.

The debt avalanche involves paying off debts starting with the highest-interest accounts first. This approach can reduce the amount of interest you pay over time.

With the debt snowball, you pay off debts starting with your smallest balances first. This approach creates a series of small successes that could provide valuable motivation to tackle your more intimidating debts. Paying off small individual debts may also improve your credit scores faster.

Consolidate Debt

Managing a bunch of debts at once can be tough, especially if one or several of them have high interest rates.

Debt consolidation involves taking out a loan to pay off several debts in one shot, leaving you with a single bill to pay in their place (you can also use services like Tally). Ideally, your new loan should have a much lower interest rate than what you’d get with most credit cards.

Consolidating credit card debts this way could also boost your credit scores since the balance of an installment loan won’t impact your credit the same way a revolving account balance will. The impact to your credit scores, however, also depends on your ability to make the loan payments (and payments for any other remaining debts) on time each month.

Debt consolidation is a great way to address high-interest debts. But if you choose this route, consider keeping your old credit cards open. You can shred them or set them aside, but the age of the accounts and their lack of balances may help your credit scores in the long run. (Note: Closing a credit card doesn’t immediately cause you to lose credit for the age of the account. However, closed accounts are deleted from your credit reports after 7–10 years.)

Insider tip

You can also consider balance transfer credit cards, although with poor credit it may be tough to get approved. These cards have 0% introductory rates for balance transfers. A 0% introductory APR allows you to move a balance away from high-interest accounts and gives you some time to pay off the debt without interest.

Negotiate With Lenders

Lenders want their money. If you can’t keep up with the payments you initially agreed to make, a lender may be willing to negotiate. A more manageable payment plan or an arrangement that allows it to come out as favorably as possible would be preferable than an outright default.

Reach out to lenders if you’re struggling with your current minimum payment. You can request adjustments to accommodate your financial situation. A certified credit counselor may also be able to negotiate a debt management plan (DMP) on your behalf, typically for a fee.

Aside from payment plan improvements, you may also be able to negotiate an opportunity to settle a debt for less than its total. But debt settlement will generally require a large, lump-sum payment up front, which may not be easy to afford. Also, unless you’re currently past due, most creditors won’t entertain the idea of a lump-sum settlement.

Collection Accounts

It’s worth pointing out that you should exercise caution when paying old collection accounts. When you don’t pay a debt, your creditors and collection agencies that purchase the debt may have the right to sue you. However, as a debt grows older, it may become time-barred. Once a debt is time-barred, a debt collector can no longer sue you.

The time-barred debt clock is different in every state. You can learn more about time-barred debts in this guide from the Federal Trade Commission.

If you make even a small payment on a time-barred debt, you might restart the collection clock. In other words, one payment could open the door to a potential lawsuit for your remaining unpaid balance. So, if you plan to settle an old collection account, it’s usually best to wait until you’ve saved a full, lump-sum settlement amount first. You may also want to speak with a consumer debt attorney for advice.

Finally, even if you do pay or settle a collection account, don’t expect an immediate jump in your credit scores. Unless a lender is using a newer scoring model (like FICO 9), paid collections may continue to damage your credit scores as long as the account is on your reports.

The good news, however, is that as collections grow older, they impact your credit less and less. After seven years from the date of default on the original account, collections have to be deleted from your credit reports altogether.

Step 4: Learn Responsible Credit Habits

After you’ve gotten a handle on delinquent debts, late bills, and high credit card balances, take some time to educate yourself on the many ways you can make sure you never run into those problems again.

Make All Payments On Time

This one’s a bit obvious, but you should never miss a loan or credit card payment unless it absolutely can’t be avoided. Payment history is one of the most prominent factors in many credit scoring models.

Minimum payments are enough if you’re only trying to avoid late fees, but we strongly recommend you pay down your full credit card statement balances each month to avoid interest charges (unless you have a 0% rate). This applies primarily to purchases, however, as cash advances and balance transfers usually begin accruing interest immediately.

We also recommend activating automatic payments so you never have to go out of your way to submit a payment before its due date. Just keep an eye on your online account to ensure the payments always go through.

Late payments can’t be reported to the credit bureaus until they’re at least 30 days late, but you can face late fees and/or other consequences with the lender from the moment you’re late.

After the 30-day waiting period has passed, the late payment will likely be reported to the consumer credit bureaus. A new late payment on your credit reports will almost certainly damage your credit scores.

Insider tip

How often do you need to use your credit cards to show a positive payment history? Well, credit scoring models usually look at delinquencies (late payments), rather than how many months you paid on time. So it doesn’t really matter if you use your card once in a while or every day, as long as you pay on time. Just be sure to use your card enough to keep it active.

Keep Your Credit Card Balances Low

The ratio of your overall credit card debt to your credit limits is called credit utilization. Credit utilization plays a major role in your credit scores.

The modern FICO Score 8, for example, calculates 30% of your credit scores from your amounts owed category of your credit reports. Your credit utilization is the most important factor considered here.

VantageScore 3.0 takes a different approach. It uses credit utilization for 20% of its scoring formula and your total amounts owed for another 11%.

That doesn’t mean racking up big credit card charges throughout the month will automatically hurt you, though. As long as your balances are paid down before the statement closing date, your credit utilization ratio should remain low with no damage done to your scores.

Don’t Borrow More Than You Can Afford

Never borrow so much money that you can’t pay it off in a timely manner. We strongly recommend paying off credit card balances in full each month. If you can’t commit to paying your credit cards in full each month, you should probably avoid swiping them altogether while you’re trying to rebuild credit.

The same goes for loans. If you’re not absolutely certain you’ll be able to afford the monthly payment without worry, the loan probably isn’t the right move.

Step 5: Build New Credit

If you’ve paid off and/or negotiated old debts, addressed inaccurate credit information on your reports, and developed a solid handle on how to deal with credit in the future,you might be ready to start building new credit accounts.

There are several ways to build new credit. We’ll guide you through a few of the best options typically available to individuals with poor credit scores.

Become an Authorized User

Find a trusted friend or family member with a consistent history of full, on-time payments, and ask to be added as an authorized user on his or her credit card account.

You can get an authorized user card to actually use or you can be added but not given a card at all. The account’s payment information (positive or negative) will generally still appear on your credit reports either way. Some card issuers don’t report authorized user accounts to the credit bureaus.

There may be certain requirements that prevent you from becoming an authorized user. However, there’s normally no credit check necessary.

Open a Credit Card

There are several credit cards you’ll probably qualify for even if your credit scores are very low. Most of them are secured.

Sure, you may have to provide a refundable deposit and settle for a card that lacks rewards and benefits. Nevertheless, credit cards are still among the most useful tools for rebuilding credit.

The Discover it® Secured (Review) is a great starting point, because it offers a relatively solid cash back rewards program, which is rare for secured cards.

Insider tip

Most unsecured credit cards require decent credit (or a relatively untarnished credit history, at least). There are exceptions marketed expressly to people with bad credit scores, like the First PREMIER® Bank Credit Card (Review) and Surge Mastercard. However, we don’t recommend these options because they usually come with a ton of extra fees, APRs that are high even for credit cards, and poor customer support.

Keep in mind that applying for a new credit card will result in a hard inquiry. A hard inquiry might negatively impact your credit scores, but the impact is often small or nonexistent. The flip side to consider is that responsible credit use over time should have a positive credit impact. That positive impact could offset any inquiry-related score drop you may experience.

Be sure to follow the above credit-building best practices if you intend to use a card to work on your credit scores.

Try a Credit Builder Loan

Credit builder loans are designed to help you build or repair your credit. You make equal monthly payments throughout the life of the loan, but you don’t get the cash up front. Instead, you receive the funds after your balance is paid in full. You’ll usually have to pay interest and certain fees, though neither tends to be too high.

Credit builder loans can be very useful on their own. They also work well alongside other methods, like secured credit cards. Using both types of credit together adds to your diversity of accounts, and a good mix of credit could benefit your scores.

Step 6: Wait

In general, the only thing that will remove accurate negative information from your credit reports is time. Late payments, collection accounts, and other negative items will typically remain on your credit reports for 7–10 years. In rare cases, you may be able to get valid late payments removed, but you shouldn’t count on it. There’s often nothing to do about negative credit entries except to wait until they’re removed from your reports.

Fortunately, the impact negative credit information has on your credit scores tends to decrease as that information gets older. You’ll probably see your credit scores go up once the information is removed from your reports (all other things being equal), but there’s a good chance they’ll increase gradually even before that.

It will also take time before the effects of your new accounts and positive behavior are felt. The key is to be patient and stick with your strategies. By staying responsible, even people with the worst credit can eventually qualify for desirable loans and better credit cards with great rates.

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