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Consumer Reports: Repairing bad credit

Posted at 8:40 AM, Mar 12, 2019
and last updated 2019-03-12 17:31:58-04

TUCSON, Ariz. - Dyalekt is a rap artist and educator. In 2011 he decided to settle down and buy a house with his partner Pamela. But a credit score he hadn't checked in years came back to haunt him. When the bank refused to give him a mortgage because of the low score, Dyalekt began repairing his credit, which had been damaged by a student loan that was in collections.

"Depending on the reasons for a low credit score, it can take months or even years to raise a low score to a good score - say 700. It also takes discipline," says Consumer Reports Money Editor, Tobie Stanger.

One of the most important things to do is to pay all your bills on time, which accounts for about 35% of your FICO score, the most common credit scoring system. Consumer Reports says if you have credit cards, try to keep your balances to no more than 10% of your available credit. Anything more could show elevated credit risk.

"Another tip is to consider taking out a personal loan to pay your credit card debt. Having a greater variety of credit types might help your credit score. Plus you may get a lower rate of interest with the loan," says Stanger.

If you can't get a traditional credit card because of your credit history, which was the case for Dyalekt, go for a secured credit card. That type requires a deposit to protect the issuer. Make timely payments and your credit score could improve.

And finally, request a free credit report once a year from each of the three reporting agencies, Experian, TransUnion and Equifax, to monitor your progress and spot any errors.