How to bounce back from bad credit

Foreclosure, bankruptcy or a history of missing payments can send your credit scores into the basement. The good news: nothing is permanent in the world of credit and credit scoring. You can rehabilitate your scores over time if you know how.

Here’s what to do:

Pull your credit reports from all three bureaus. Check for errors and dispute any serious mistakes, such as accounts that aren’t yours or late payments being reported when you paid on time.

If you don’t have any credit cards, apply for a secured card. These cards give you a credit line that’s equal to the amount of cash you deposit with the issuing bank. NerdWallet recommends the Capital One Secured Card and the Orchard Bank Secured Card.

Use your cards lightly but regularly. Your charges shouldn’t total more than about 30% of your credit limit—10% or less would be even better. And you shouldn’t charge more than you can afford to pay off in full every month. Carrying balances doesn’t help your credit scores, and it’s expensive. So don’t do it.

Apply for an installment loan. Your credit scores will recover faster if you have a mix of credit, which means both revolving accounts (credit cards) and installment accounts (mortgages, auto loans, student loans). If you don’t already have an installment loan, consider applying for a personal loan from your local credit union. These member-owned financial institutions often have been rates and more flexible credit standards than traditional banks. Don’t belong to a credit union? You can find one you’re eligible to join here.

Pay your bills on time, all of the time. One skipped payment can devastate your scores. So can an account that’s charged off, or that’s turned over to collections.

You can track your progress by using a credit monitoring service that includes your credit score. Some sites, like Credit Karma, offer credit monitoring for free, although the credit score you get isn’t the FICO score most lenders use. To get your FICO, you’ll need to sign up with

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  1. Rochelle Battersby says

    Dear Liz-
    First, thank you for posting information on how to improve credit scores. Here’s my question: I have about 12 items on my credit report that are revolving cards that are closed and another 12 that have a $0 balance, but still open. Should I contact the reporting agencies to have these cleared, or is it better to leave them? I am looking ot increase my score quickly.


    • I’m not sure what you mean by “cleared,” but you can’t tell the bureaus to stop showing accounts, closed or otherwise. If the 12 accounts with zero balances are actually closed, you are under no obligation to point that out to the bureaus, since those accounts are helping your credit scores and showing them as closed could hurt those numbers. Hope that helps.

  2. Brad George says

    Hi Liz – I just found you online – I am hoping you can help – I know you are extremely busy, IDK if this will get to you directly or not…. Here’s the quick version… My wife and I both work for the USPS – 27 yrs apiece… 12 yrs ago, I took a day job at the USPS that didn’t have guaranteed hrs, but allowed me to work DAYS 🙂 it was great, except over time, my hrs were cut down from 36 to 34 to 24 per week! for several yrs, I couldn’t bid back to a night job (guaranteed 40 hrs), finally I was able to and continue that to this day… Since we were first married 30 yrs ago, we had credit cards, all through the time on my day shift at the USPS, eventually LOTS of them, with high balances – couldn’t pay them w/my short hrs… Ended up borrowing out of our TSP most of it to pay them off (after attending Dave Ramseys’ classes) now they are all gone (except one that is allowing us to pay $50 per month for ever)… Since then, I have guaranteed hrs, my wife and I make very good money per yr now – BUT our Credit Scores are an average of 630 – We need to get them up to 660 or better – We have a small auto loan that is paid off in June, and a general loan that is small that will be paid off in June – Other than that, no loans but our house – Towards the end of 9 yrs on days, we bough a larger home (still had good credit at that time) more than we needed, but we are here now and want to stay… Couldn’t make our mtg pmts for about 1 yr… Qualified for that program that “re works” our loan, now in the past year, we’ve made all our pmts, not been late on anything – are paying off our small loans (the 2 of them) and are needing a Home Equity L.O.C. to make repairs on our home…. the C.U. told me that our combined 630 score is still a bit low, needs to be about 660… My question to you – We are moving fwd, but how can we speed up this process??? We are very determined to being very careful with any credit we are granted, and we now know how to use it properly, we just need to get this numbers up in the next few months if possible….. Thank you so much for your time – We really messed up early in life, and now know how to “not” do that again….. I hope to hear back from you…

  3. Liz

    I read you book “Your Credit Score.”

    I’ve got an odd situation so could use your advice.

    Since 2010, all three credit cards went into collection after I could not pay.

    One of them sued me and with help of an attorney I
    settled and making payment every month now. Financially things are getting better. But I’m not in a position to pay off all of them.

    My FICO is naturally very low so I want to improve it fast. My attorney said bankruptcy could erase all the debts including the settlement after they sued me. But bankruptcy will be on my record for 7 years

    I do need credit card and sometime this year I want to get a new car.

    So would you rather advice that I apply for secured credit cards and auto loans in order to improve FICO fast? Since you advise revolving and instalment credits improve FICO really fast?

    Thank you.

    • Don’t be in a rush to take on new debts before you’ve dealt with your old ones. My book “Your Credit Score” (you can find it at your local library) has detailed advice about improving your scores, but you really need to be on a sound financial footing before you start.

  4. Elizabeth Vieira says

    My husband filed Chapter 13 bankruptcy in Florida, I did not since the house was only in his name. Can he use money out of his 401 K to pay for my dental bill?
    Thank you!