Repairing Your Credit Score in 4 Steps

In the thoughtless world of plastic transactions, a whole lot of people find themselves in more debt than anticipated. Around 30 percent of Americans have bad credit merchant accounts, or a score lower than 601, according to data from VantageScore and TransUnion.

If you’re among these 68 million people, you might be wondering what you can do to reverse the trend. Aside from checking your credit report for errors (which you should definitely do), the recipe is quite simple. Repair your credit score in four straightforward steps:

Pay Your Bills on Time

As smooth and painless as it feels to pay for things with a credit card, real money is still being exchanged. The amount that those seemingly effortless swipes (or, I suppose inserts) add up to carries a due date. If it’s not met, a credit score suffers. How badly? Payment history is the most significant component of the FICO scoring system, comprising 35 percent of a credit score. Missed payments obviously leave individuals with impacted scores, but late payments can also chip away at a credit score.

Thankfully, it’s not all that difficult to pay credit card bills on time, especially if a balance is from essential purchases already budgeted for. Regardless, it’s a good idea to set up automated payment reminders or even automated bill pay so you can guarantee you’ll never miss another credit card bill.

Rest assured that the shaky payments of your past shouldn’t impact your future too much, at least, if you can put together a string of positive behavior. Creditors give recent positive patterns more weight than past negative marks. The tricky part is getting approved for another credit card with a score in the weeds. NerdWallet breaks down three credit cards that are easier to get approved for.

Pay More Than the Minimum

As tempting as it is to tread water paying the minimum balance, deep down, you’re hurting yourself and your credit score. Paying the minimum balance leads to maximum interest charges and creates revolving debt, which doesn’t improve your credit utilization. Second to payment history, credit utilization factors into 30 percent of FICO’s credit score. So it’s fair to say that high balances and minimum payments are an excellent combination to keep low credit scores consistent. Low balances and minimum payments? Not so dangerous. But they won’t improve a (bad) credit score, or make much sense.

Keep Track of Accounts and Credit Balances

Given the weight of credit usage in a FICO score, poor credit scores will improve as long as progress is made on debt. If you’re barely keeping pace with several high balances and trying to find a solution while increasing your score in the process, then it’s worth looking into debt consolidation options. Entrepreneur and financial thought leader, Andrew Housser, is the CEO of Freedom Financial Network, which works with debtors to organize their balances and create an action plan to get out of debt.

If your situation isn’t as dire, but in need of repair, the important thing to focus on is practicing healthy account behavior. This includes making payments on time and not using too much of your overall credit limit, but also involves not opening too many accounts at a time or attempting to close unused cards to manipulate your score. After all, these accounts—closed or not—will stay on credit reports for several more years.

This doesn’t mean you should freeze all activity, however. Opening a new account and maintaining responsible behavior can accelerate credit-building.

Make Payments Before Taking on New Debts

As mentioned above, revolving debt is a credit-score killer. High utilization rates make creditors weary. If you add to your debt without paying down existing balances, you’ll suffer the consequences in further credit score damage and all sorts of extra money in interest. Never pay for anything with a credit card if you already carry debt. By doing so, your overall utilization rate will increase when you want it to decrease.

Don’t trust yourself? Cut up your cards. A five-to-seven business day card-issuing wait period should quell any momentary urges to spend. It’s also worth stating that while debt consolidation options like balance transfers and personal loans can be useful in the right situation, it can also be the epitome of moving money around without attacking any real amount of principal debt.

Make these four behaviors a habit, and soon enough you’ll have a high-flying credit score that’ll vouch for you in any scenario.