No matter how badly you’ve messed up, chances are you probably don’t have a rock-bottom 300 credit score.
“FICO scores of 300 are extremely rare; in fact, only 1% of the population has a score less than 470, and 4% have a score less than 500,” says FICO principal scientist Tommy Lee.
What a low score means
An extremely low score means you’ve had credit and made some serious mistakes with it.
FICO scores of 300 are extremely rare.
Most of those with scores below 500 have what Lee describes as “severe” late payments, and many have negative marks from public records or collections. In addition, they are using 131% of their available credit, meaning their credit cards are beyond maxed out.
If you believe your debt is insurmountable, bankruptcy may be the quickest route to recovering credit respectability.
How to improve your credit from bad to good
The good news about an extremely low credit score is that it has far more room to grow than it does to fall.
If you begin to pay on time and chip away at your credit card balances, your score will almost certainly rise.
If you begin to pay on time and chip away at your credit card balances, your score will almost certainly rise. And the farther your missteps fade into the past, the less impact they will have.
The two things that have the greatest impact on your credit score are:
- Whether or not you pay on time.
- The amount of credit you use, as a percentage of your credit limits.
Paying on time, every time, should be your first priority. Nothing matters more.
Other things you can do to raise your credit score:
- Check your credit reports for errors that may be hurting your score. You are entitled to a free annual credit report from each of the three major credit bureaus. And you stay abreast of any changes with free credit report information that updates every two weeks from NerdWallet.
- Keep open any credit accounts that you still have. It’s tempting to close old cards once you’ve paid them off, but that can hurt your credit score: It can reduce your overall available credit, and it shortens your average age of accounts, both of which are factors in your score.
- Consider getting a credit-builder loan and/or secured credit card to help build your credit if you do not have open credit accounts. Pay on time and use credit lightly.
Time and patience are the best cures for any poor credit score — combined with responsible credit habits.
Nothing is forever, not even bad credit. While a bad credit situation may seem hopeless, good habits practiced consistently will heal even the most broken of credit scores.
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