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How To Recover From Messed-Up Credit

messed-up credit

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Credit Sesame with tips on how to recover from messed-up credit.

Sometimes, finances can feel overwhelming. You might experience a sinking feeling, particularly if your credit isn’t where you’d like it to be. Maybe you’ve gotten behind on a payment or taken out multiple loans. You’re unsure whether your credit can ever improve. The good news is that there are ways to recover from messed-up credit. You can start with the basics, apply some fundamental best practices and give your credit time to improve.

What are some common ways credit gets messed up?

There are several reasons credit and resulting credit scores can be lower than optimal. Here are some examples that might sound familiar, depending on your circumstances:

  • Bankruptcy filing. Although annual bankruptcy levels in the U.S. are falling, they remain high. In 2021, there were close to 400,000 non-business bankruptcy filings, according to the Administrative Office of the U.S. Courts. If you have experienced bankruptcy, this could result in weaker credit than you’ve had in the past.
  • Credit fraud. If someone has stolen your identity, this can seriously hurt your credit. For example, if someone has successfully taken out new loans in your name, you might experience a lower credit score. Fraudulent activity could also result in new debt being added to your name, disrupting the balance of credit in use to available credit that’s not in use. Finally, if identity theft occurs, the culprit could take out multiple new applications for credit over a short period of time in your name. This can be problematic and damage your credit health.
  • High active debt levels. If you use too much of the credit available to you, you might be holding too much debt. This can pull your credit health and accompanying credit score lower than you wish.
  • Missed payments. If you skip a payment or two on a credit card, a car loan or a student loan, this can negatively impact your overall credit picture.

Any of the above information can be gathered by the credit reporting agencies–Equifax, Experian and Transunion–and incorporated into your credit report. It might not make a difference right away. Yet eventually, if a bank, a landlord or another legally authorized person pulls your report, they might discover your credit needs work. This could limit your ability to get a rental agreement or secure a mortgage, among other potential repercussions. You can take several steps to get your credit back on solid footing. Let’s take a look at some of them.

How can I begin rebuilding messed-up credit?

A great place to start is the free Credit Sesame app. This mobile tool provides you with a picture of your credit health and suggests ways you can improve it.

In addition, several other steps can help you begin the process of putting messed-up credit in the past:

  1. Establish your baseline. Use the Credit Sesame app to access your credit report. You can also request this directly from the three reporting agencies. Study the report, noticing both the positive attributes and also any negative factors listed. Make yourself a list with two columns. On the left, write down things you’re doing already that you should continue to do. This might include keeping credit card balances reasonable without using your full limit. On the right, identify steps you might take to begin rebuilding your credit. This could include a commitment to on-time payments on any credit cards or loans you hold. It might also include specific goals, with actual calendar dates, for getting current on any debts for which you have missed payments. If you have spotted fraudulent activity, note the steps you will take to get the record corrected.
  2. Manage your debt payments closely. It’s easy to miss a bill in the mail or, these days, in your email inbox. Keep a running list of all the monthly payments you owe, and make sure these are paid on time. Explore setting some or all of them up to be automatically paid via your bank account. Most online services will send you a receipt via snail mail or email confirming the bill has been paid per your requests. When you make timely payments and automate the process as much as you feel comfortable, you can begin rebuilding your messed-up credit.
  3. Use a reasonable amount of available credit. People with stronger credit and higher credit scores generally don’t use all of the credit available to them. They take out a percentage of debt for a car loan or a credit card, for example, pay that balance down and don’t use their loans to their full limit of available credit. This ratio of used and unused credit is an important factor to maintain to rebuild credit.
  4. Avoid applying for more credit. Too many inquiries about taking out new credit cards or loans can raise red flags for people viewing your credit report. Design your budget in such a way that you’re able to cover your expenses, including existing monthly payments on debt, without needing to add more debt to the mix. This can strengthen your credit because it illustrates your ability to live within your means and make good on your financial commitments.
  5. Explore ways to get recognition for good financial behavior. Some of the credit reporting agencies such as Experian let you add utility payments and phone bills to your credit report. Assuming you pay these in full each month, these kinds of recurring payments give further evidence you are being a responsible steward of your money. Be sure to research any programs before signing off, and read the fine print. They might be an additional way to build your credit after a mess-up.
  6. Dispute errors quickly and effectively. Spotting fraud on your credit report is no fun. Thankfully, there are ways to contact each of the credit reporting agencies to dispute such errors. Learn how to file a dispute with this free guide from Credit Sesame.

How long might it take to strengthen my credit?

Building back credit after a mess-up requires time and commitment to the fundamental building blocks described in this article. Everyone will have different timeframes based on their unique circumstances.

Smaller issues might be resolved in a few months, though it might take longer than that for improvements to appear on your credit report.

Larger issues such as bankruptcy or bills going to collections might take years to address. It could be seven to 10 years before this type of information drops off your credit report.

Wherever you find yourself on your journey to fixing messed-up credit, the steps described earlier are largely within your control. You can begin the process of building back your credit today.

What other resources can I consult as I work to improve my credit?

To get started with recovering from messed-up credit, download the Credit Sesame app and open a free account. Consult the information resources on the Credit Sesame website and also check out more great tips on the Credit Sesame blog. All of these steps will keep you encouraged and motivated on your path to stronger credit.

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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

Nate Birt
Nate Birt is a personal finance writer with 15 years of experience as a journalist, business leader, and social impact executive. His company, Silver Maple Strategies, helps clients unlock the power of persuasive storytelling to capture imaginations and secure investment.

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