How to repair your credit

Life in the 600s got you down? Fear not, fellow credit warriors. You don't need a costly company to repair your credit score. In fact, most of those credit repair ads you come across are straight-up scams. Anything you can do to get a better score is well within your own power.

With a strong debt management plan, you're ready to become the boss of your budget, stash away savings, and empower your financial future. Here's how to get there.

Retrieve your credit reports

First, you need to see what's actually on your report. If you've never checked your credit before, relax. It probably won't be quite as ugly as you expect, even if you've missed a few bills over the years.

Like credit repair companies, sites that charge for your credit report are trying to make money off your financial situation. Skip the scammers and visit annualcreditreport.com, the government-approved website where you can get a free copy of a report every year from each of the three major credit bureaus (Equifax, TransUnion, and Experian). You're also entitled to a free report anytime you get turned down for a credit card or loan. You’ll have access to free reports, but not a free credit score.

You can also request your report by mail by writing to:

Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281

To request your annual reports by phone, you can call the organization at 1-877-322-8228.

Look for incorrect info

Next, scan all three credit reports to find accounts you don't recognize. Yes, it's a tedious process, but it can also save you an incredible amount of money in interest over the years. Keep your eyes open for:

• Personal information that doesn't match your own

• Unrecognized addresses or phone numbers

• Accounts that aren't yours

• Amounts that seem wrong

• Inaccurate status (accounts you paid listed as unpaid, for example)

• Missing accounts that should be there

• Incorrect public records (bankruptcies and foreclosures, for example)

• Accounts listed more than once

• Inquiries from companies you've never heard of

Basically, if it looks fishy, it deserves a dispute report.

File disputes for errors

The bureaus make it easy to file disputes right from your report. Just click the link and enter all the necessary info. You'll need to go through the process with TransUnion, Experian, and Equifax, although you might not see the same errors across the board.

The credit bureaus will investigate to see if they can delete the accounts in question. They must complete their investigations within 45 days of your request. Then, they have to send you a written response within 5 business days of completing the investigation to notify you of the results.

Catch up on missed bills

About 35% of your FICO credit score—more than a third—comes from paying bills on time. If that's not your strong suit, it's time to flip the script. Start with a detailed budget that lists all your expenses and income sources. Dedicate each paycheck to specific bills and stick to it.

It's also time to catch up on those overdue balances. Start by paying any bills that are less than 30 days late—they haven't yet been reported to the credit bureaus.

Once you have those out of the way, switch gears to pay your oldest past-due balances. Even if they've been reported to the credit bureaus, it'll boost your score to bring them current.

Once a bill is more than 180 days late, it becomes a charge-off. Basically, that means the bank has given up hope that you'll ever pay. You don't want that to happen because it can create an even bigger credit score deficit. Lenders won't want to give you the time of day for quite some time after a charge-off.

Boost your available credit

Now that you're paying bills on time, you can work on increasing the amount you put toward the balance. Lenders look closely at your credit utilization rate. That's the portion of your available balance you've actually spent.

Keeping credit utilization under 30% is one of the fastest ways to skyrocket your score. In fact, this number accounts for 30% of your FICO credit score, almost as much as your payment history. If you're maxing out your cards on the regular, your score can suffer.

Let's look at some super-quick math to see how this works. Pretend you got a new credit card with a $2,000 credit limit. Once you start using it, you will benefit from keeping your balance below 30% of that limit, which equals $600.

If you want to increase your credit limit down the road, you might qualify if you have an OK credit score. A quick call to your credit card company lets you check eligibility.

If you have a parent or spouse with better credit, see if they'll add you as an authorized user on one of their cards. You'll benefit from their good credit; a higher available balance translates to a better utilization score. You don't have to make a purchase or even have access to the card for this strategy to work in your favor.

Cut down credit usage

Next, try to slow down your spending. "Do I really need that?" should become your new mantra. Enforce a 24-hour waiting period to complete an online purchase after you fill your cart. Look for places you can cut expenses, like yet another streaming service or that gym membership you never use (don't worry, you're not the only one who skips crack-of-dawn spin class every morning).

If you have trouble sticking to a budget with plastic, adopt a strict cash-only policy. Hide the cards or freeze them in ice if you can't resist. Take cards out of your digital wallet and remove the numbers from your browser's autofill. Make it harder to click that checkout icon.

Tracking your spending can create a light bulb moment. If you're not sure exactly how much your daily expenditures really cost, it's time to investigate. Write down every swipe to look for the budget leaks you need to plug.

It might also help to set small goals. Reward yourself when you hit a credit milestone. Each time you pay down a certain amount of credit card debt, you're one step closer to that vacation or home renovation.

Pay off expensive credit cards

Have you heard of the snowball method? With this smart strategy, get rid of the cards that cost you the most money. Hint—it's the ones with the highest interest rates.

Return to that budget you wrote out way back in step one. See how much money you can afford to put toward your credit cards. Then, make only the minimum payments on all but one of your accounts.

Yes, you read that right. Put all your extra debt-payoff funds into the highest-interest card, then pay just the minimum on the rest. Once you get that balance down to zero, repeat the process with the second-most-expensive account and so on. See? You're "snowballing" your way to a debt-free lifestyle.

If you qualify for a personal loan, you can potentially use it to consolidate your debt. You'll save on your monthly payments and accelerate your journey to a better credit score.

However, it's only worthwhile if the new loan has a lower annual percentage rate (APR). You'll also want to do the math on the transfer fee. Some card companies charge up to 5% of your balance—a major chunk of change.

Expand your horizons

Managing more than one type of credit at once makes a good impression. Once your score starts to rise, you can build it up further by taking out new kinds of loans. Most lenders want to see a healthy mix of secured accounts, like auto loans and mortgages, and unsecured accounts, like credit cards and student loan debt. Account diversity makes up about 10% of your credit score.

Don't diversify too quickly, however. Take it slow since opening too many new accounts in a short period isn't a good look in the eyes of the credit bureaus.

If you need extra help, look into free services that report alternate sources to credit bureaus. You can potentially see a score increase by keeping up with your rent, utility payments, and other accounts.

Maintain old accounts

Even after you pay off credit cards you don't use, don't cancel them! The credit bureaus give you points for the length of your credit history based on your oldest account.

You might want to make small purchases on your old cards occasionally. Otherwise, the bank may close the account, which is no bueno. The length of your credit history counts for 15% of your score.

Sometimes, earning a better credit score just takes time. That's especially true if you have negative items in your history, such as charge-offs, collections, and bankruptcy filings. These black marks can take up to 10 years to drop off your record.

Be picky about new loans

Every time you apply for a credit card or loan, the lender runs a hard credit check. Too many of these inquiries can tank your score since they make up about 10% of the total. Before you decide to sign up for an attractive offer, make sure you actually need the funds.

Another strategy? See if you can get preapproved with a soft credit check. This option doesn't affect your score, so you're in the clear if you don't measure up. You might also want to look for special features like reward credit cards and 0% balance transfer offers.

Don't be afraid to shop around when you need new credit, like for a mortgage or car. Credit bureaus count it as a single inquiry as long as you apply for several loans in a few weeks.

As you repair credit, you should also set aside savings. Eventually, strive to have about 3 months of expenses in a dedicated emergency fund. This cash provides a cushion that keeps you from resorting to high-interest loans if you have car trouble or get laid off.

Keep current on your cards

If you've followed the first 10 steps, you're probably in the middle of a credit score renaissance. Keep the good vibes going by staying up to date on your accounts. If you're not great with dates, try setting up autopay for a set-it-and-forget-it approach. You can also just pay the bills as soon as they come in. That way, you won't find them under a stack of mail in a few weeks, long overdue.

This debt management plan can put you on the path to a jaw-dropping credit score. It's time to start making your money work for you rather than just working to pay your bills. If you can't get your score under control on your own, you may want to consult a nonprofit credit counseling service. The National Foundation for Credit Counseling provides details about reputable organizations.