3 Tips to Fix Bad Credit

By Erin El Issa

If you've found yourself looking for bad-credit credit cards or being turned down for loan applications, you may be wondering how to fix your credit. The bad news? To fix bad credit and raise your credit scores substantially, you must change your habits, and that takes time and patience.

But there are still steps you can take today to support your credit. Along with paying your bills on time and in full, you can try these tips to bump your scores.

1. Check your credit reports

A 2013 study by the Federal Trade Commission found that one in four consumers' credit reports had an error that could affect their credit scores. There's no sense in paying for mistakes you didn't make, so keep an eye on your credit reports. Look for:

• Incorrect addresses or other personal information. This may be a sign that your accounts are being mixed up with someone else's.

2. Lower your credit utilization

Divide your total credit balances by your total credit limits, and you'll find your credit utilization ratio, an important factor in your credit scores. Generally, the more available credit you use from month to month, the worse your score will be. You can improve your ratio a couple of ways:

• Pay down your debt. Keeping your balances low may not be easy, but it is a great way to improve your credit standing. Paying more than once a month can help, if your issuer allows it.

3. Be smart about credit applications

Your credit scores depend on a few, sometimes conflicting, rules about new credit. Applying for new credit triggers a credit inquiry, which is bad. But having more of it, especially different kinds, is good. How should you reconcile these rules?

• Don't apply for new cards or cancel old ones. Having balances on many accounts reflects negatively on your credit, but simply having more available credit in total is a positive. Don't cancel old accounts, but don't apply for new ones, either.