How to Build Your Credit Score from Below 300 to Over 700

Having a credit score below 300 is considered very poor and will make it difficult to get approved for loans, mortgages, credit cards, and other lines of credit. However, with some effort and discipline, you can dramatically improve your credit score over time. Here are the most effective ways to build your credit score from below 300 up to over 700.

Understand What Impacts Your Credit Score

The first step is to understand what factors determine your credit score so you can focus on the right areas. Here are the main factors that make up your FICO credit score:

• (35% of the total) Payment history: This includes whether you make payments on time, have late payments, or have accounts in collections. This is the most important factor.

• Your credit utilization ratio shows how much you owe on revolving credit accounts like credit cards compared to your credit limits. It’s 30% of your total credit limit.

• 15%): The length of your credit history, or how long you’ve had credit accounts open. Longer credit histories are better for you.

• New credit (10%) – How many new accounts you’ve opened recently and how many recent credit inquiries you have. Too many dings your score.

• Credit mix (10%) – Having different types of credit like mortgages, auto loans, and credit cards. More variety helps your score.

Check Your Credit Reports for Errors

Before you start trying to improve your credit, get your free annual credit reports from AnnualCreditReport.com and review them closely. Look for any mistakes or fraudulent accounts bringing down your scores. Disputing errors can provide a quick boost.

Pay All Bills On Time

Payment history has the biggest impact on your scores. From now on, make sure you pay all of your monthly bills on time, including rent, utilities, loans, and credit cards. Set up autopay or reminders to avoid missed payments. Bring any past due accounts current if possible.

Pay Down Revolving Balances

Keep credit card balances as low as possible, ideally below 10% of your credit limits. Pay off cards completely each month if you can. Also ask issuers for credit limit increases to lower your utilization ratios.

Avoid New Credit Applications

Don’t apply for new credit for a while until your scores improve. Too many new accounts and hard inquiries will hurt your scores. Wait at least 6 months to a year before applying for new credit.

Become an Authorized User

Ask a family member with great credit to add you as an authorized user on a credit card. This can jumpstart your credit history. Make sure they have low balances and always pay on time.

Use Secured Credit Cards

Secured cards require a refundable security deposit and are easier to get with poor credit. Use them responsibly by paying on time and keeping balances low. This builds positive history.

Deal with Collections Accounts

If you have unpaid collections accounts, consider paying them off and then negotiating to get them deleted. Paid or unpaid collections hurt your scores. Getting them removed can help increase your scores.

Give It Time

Be patient and don’t expect your credit to be fixed overnight. Focus on making payments on time every month and keeping balances low. With consistent effort, you can increase your credit score significantly within 6 months to a year.

Track Your Progress

Check your credit reports every few months to review your progress. Many credit cards and apps now offer free credit scores as well. Watching your scores slowly improve will keep you motivated.

Create a Budget

Making a budget is key to ensuring you can afford to make your payments on time each month and keep credit card balances low. List your income and expenses, reduce spending where possible, and allocate funds to financial priorities like debt payments.

Explore Credit-Builder Loans

These loans put the loan amount into a savings account while you make fixed payments over time. The on-time payments are then reported to help build your credit history.

Add Your Rent to Your Credit Report

Services like Rent Reporters and Rental Kharma let you report on-time rent payments to the credit bureaus to build your payment history. Some services are free while others charge a fee.

Only Apply for Credit You Need

Once your scores improve into the good range, you can apply for new credit accounts more freely. But only open accounts you actually have a need for and will use responsibly, not just for the sake of building credit.

Continue Monitoring Your Credit

Even after you’ve built your credit, it’s important to keep monitoring your credit reports regularly and stay on top of payments and balances. This will ensure your strong credit score is maintained over the long-term.

Consider Getting a Secured Credit Card

Secured credit cards require an upfront security deposit that acts as your credit limit. They are easier to qualify for and a great way to start building positive payment history. Just be sure to pay your bill on time and in full each month.

Don’t Close Old Credit Accounts

Avoid closing your oldest credit cards since the length of your credit history is a factor in your score. You can stop using older cards but try to keep them open. Closing the account could shorten your history.

Review Your Credit Report Disputes

If you’ve disputed information on your credit reports, follow up with the bureaus periodically to ensure the disputes are being properly investigated and inaccurate data gets removed promptly. This can boost your score.

Sign Up for Credit Monitoring

Using a free service like Credit Karma can help you monitor your scores and reports regularly. Watching your credit improve over time will keep you motivated. Many credit cards also offer free credit scores.

Talk to Recent Lenders

If you were recently denied for a mortgage or auto loan, call the lender for specifics on why you were denied. They can point you to areas of your credit that need work which will help guide your improvement efforts.