Your Ultimate Guide on How to Rebuild Your Credit

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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how to rebuild your credit

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A significant portion of our financial lives is determined by a three-digit credit score. The higher your credit score, the more financial opportunities you’ll have access to – and at a lower cost, no less.

If your score isn’t where you want it to be, it’s important to learn how to rebuild your credit. So if you’re in serious need of rebuilding credit, a few small steps can make a huge difference in your score.

Ready to tackle your score head-on? Let’s get to it.

Before you can rebuild credit, understand how it works

1. How your credit score is calculated

The way your credit score is calculated is pretty clear-cut. The two leading credit scores developers – FICO and VantageScore – rely on the following main factors to calculate your score:

how to rebuild your credit

Image credit: Experian

The main takeaway is that payment history is the most important factor in all of your credit scores. If you did nothing else but pay all of your bills on time from now on, then you’d already be on the way to rebuilding credit.

The other factors are just as simple. Keep your revolving debt – such as credit cards – low. Thirty percent or less of your credit limit is ideal.

Also, keep accounts open so you can build a long history with them. And, only apply for credit when you need it. That way you won’t appear to be desperate for new credit as if your income is too stretched without it.

If you’re curious to see how making changes such as these can affect your score, check out this chart from VantageScore.

rebuilding credit

Image credit: VantageScore

This chart isn’t just useful for seeing the impact of your actions. It’s also useful in seeing how lenders interpret your behavior. Understanding how lenders view borrowers’ behaviors is key when learning how to build good credit.

2. How long certain factors affect your credit score

Besides understanding the factors that are used to calculate your credit score, it’s also helpful to know how long the items that factor into your credit score stay on your credit report.

According to VantageScore – the credit score that developed by the three credit scoring agencies – here’s how long negative items remain on your credit report:

  • Bankruptcy and other public records: seven to 10 years
  • Late payments: seven years
  • Collections: seven years

If this list scares you, don’t worry. Just because these items appear on your report for a long time doesn’t mean they’ll keep your score down for that long. The biggest impact these items have on your report is in the first month they happen. After that, the impact diminishes over time.

Here’s a chart to show you how these negative items can start to diminish in importance, even as they remain on your credit report.

rebuild credit

Image credit: VantageScore

As you can see from the chart, the percentage with which each item affects your credit score goes down as time goes on.

Therefore, if something happened in the past to hurt your score, don’t stress out about it. Instead, focus on making sure that the actions you take from now on only have a positive impact on your score – such as paying bills on time and reducing debt.

How to rebuild your credit

1. Diagnose what went wrong

The first thing you need to do on the road to rebuilding credit is to understand what happened in the first place. We all have a general understanding of what got in our way. It could be a maxed out credit card, an account sent to collections, or a few too many late payments.

If you’ve recently discovered that your credit score isn’t where you want it to be, examine your borrowing behaviors. If you aren’t sure what led to your current score, obtain your credit report at and look for negative items you might not have known about.

You can also look into your reason code to find out. The reason code was developed by VantageScore to make it easier to understand the reasons behind your credit score. You can find your reason code wherever you check your credit score for free and evaluate your reason code at

2. Correct negative items on your credit report

After you’ve discovered the main reason(s) your score is what it is right now, the next step is to go after any negative items on your credit report.

For example, if you have some accounts in collections, the best thing you can do is to take care of them as soon as possible. Contact the collections company currently in possession of those accounts and either negotiate with them or set up a plan to repay the debt. When you do this, make sure to get the agreement in writing before you start repaying.

And keep in mind that you don’t need an outside company to help you negotiate or settle the debt with debt collectors. The Consumer Finance Protection Bureau (CFPB) even warns consumers about doing this:

Be wary of companies that charge money in advance to settle your debts for you. Some debt settlement companies promise more than they deliver. Certain creditors may also refuse to work with the debt settlement company you choose. In many cases, the debt settlement company won’t be able to settle the debt for you anyway.

In short, negotiate with the debt collector yourself. Remember, it’s in their best interest that you repay the debt. So if you’re persistent and outline a clear plan of what you can reasonably do, they should work with you.

Finally, if there are negative items on your credit report aren’t yours, dispute these credit report errors immediately with the credit reporting agency (or agencies) showing those items.

3. Obtain a new copy of your credit report

After you’ve spent time making sure the negative items are off of your credit report, go ahead and check your credit report and score again.

The good news is you get one free credit report per year from each of the three credit reporting agencies. And you can get your free credit score easily at a variety of sites.

Getting a new copy of your report will help you see where you stand now that you’ve cleaned up some of the things that were hurting your score. This will make it easier for you to see what you’re working with to move forward.

4. Create a debt payoff strategy

If you have a significant amount of revolving debt (such as credit cards), then creating a plan to pay it down is important at this stage in the game.

If you have more than one credit card or type of debt, here’s how you can work to pay them off faster:

  • Line up your accounts from either highest interest rate to lowest or lowest balance to highest.
  • Decide if you want to pay off the highest interest rate accounts first (to pay off debt faster) or lowest balances first (to get some quick wins out of the gate).
  • Apply any extra money you have to debt – including tax refunds, birthday money, leftover money from a revised budget, and so on.
  • Make sure the extra money only goes to the first account on your list while all the rest of the accounts get the minimum payment.
  • Once that account is paid off, apply everything you were paying on that to your next account.
  • Continue this until you’re debt-free.

The magic behind this approach is momentum. It might seem slow going at first, but once you roll over your first account’s payments to your next account, each account after that will start getting paid off faster.

The point is never to reduce the monthly amount you’re paying on debt until the debt is gone. So while you could pay less on your debt each month once an account or two is paid off, you don’t because you know applying that extra to your other debt will help you pay it all off faster.

5. Automate your bill payments

In keeping with the most important factor in your credit score – payment history – now is a good time to set up automatic bill payments. That way you can be sure you’ll never pay late.

There are three ways to do this:

  • Set up automatic payments on the websites of your bill collectors.
  • Create automatic payments for all of your bill collectors from your bank account online or from a bill-pay app.
  • Use your credit card to make automatic payments.

The first option might take the longest to set up. It also could be harder to track. The latter two centralize where your payments are coming from.

But if you set up payments from your bank account, you should keep a payment schedule to ensure that you check your available balance the day each payment hits. The last thing you want is an overdrawn account.

It also helps to keep a buffer in your checking account. But that will only work if your buffer is large enough to pay your most expensive bill.

If you set up payments on your credit card, you don’t have to check your balance. However, you will need to check your available credit. Otherwise, your payments might get denied, which can cause a disruption in the services you’re paying for.

You should also pay that credit card bill off in full every month. If you don’t, you’ll be paying interest on your monthly bill payments.

At the end of that day, stay on top of all these payments, so they don’t cause more problems for you down the road.

6. Obtain a secured credit card

If your credit score took a big hit in the past and you struggle to get or use new credit, then you might want to consider getting a secured credit card. These credit cards are easy to be approved for, hard to fall into debt with, and great tools for building or rebuilding credit.

The reason secured credit cards are easy to be approved for is that they require a security deposit. Often (though not always) the security deposit amount dictates your credit limit. That’s what ensures that you can’t charge more than you can repay as easily as you can on a traditional credit card.

If you get a card like this, use it to make small purchases and pay it off in full every month. This gives you a chance to build a positive payment history on credit and can improve your score.

Also, many secured credit cards are automatically reviewed for upgrades to traditional credit cards. That means after several months to a year of using this type of card could qualify you for a traditional credit card.

7. Plot out regular credit review dates

Finally, as you continue working to rebuild credit, plot out regular calendar dates to review your progress. You could do once a month or once a quarter even.

Turn this into a calendar event for yourself or, if you’ve combined finances with a significant other, as a couple. Then analyze your credit score, your credit report if you’re up for your new annual report, and your financial accounts.

This will ensure that you’re taking control of your finances and your credit score. Never take a backseat in this process – your credit score impacts your life in a real way. Make sure you’re happy with the result by following these steps and tracking your progress.

Besides, it’s always fun to see your hard work pay off!

Rebuild credit for the long haul

If you’re thinking about how to rebuild your credit because your score is too low for your liking, then you probably feel like all of this is an emergency. And that’s okay – following the steps above can get you in the clear.

If you go full-speed ahead all the time, you might burn out and stop trying altogether. And that could put you right back into the situation you’re in right now.

However, if you focus on the long haul, you can create sustainable actions that will help you build and maintain good credit for years to come.

Remember, to rebuild credit is a marathon, not a sprint. Stay motivated, stay consistent, stay focused, and you’ll reach your goals and stay there.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderVariable APREligible Degrees 
Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit, email us at, or call 888-601-2801 for more information on ourstudent loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.

2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.899% APR to 8.179% APR (with AutoPay). Variable rates from 2.570% APR to 6.980% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. SoFi rate ranges are current as of September 14, 2018 and are subject to change without notice. See APR examples and terms. Lowest variable rate of 2.570% APR assumes the current index rate derived from the 1-month LIBOR of 2.08% plus 0.740% margin minus 0.25% AutoPay discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.
  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (

4 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.

5 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

6 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.57%-8.17% (2.57%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.75%-8.69% (3.75%-8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit We also have several resources available to help the borrower make a decision at, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Estimated average savings amount is based on 14,659 Education Refinance Loan customers who saved on loans between August 1, 2017 and July 31, 2018. The calculation is derived by averaging monthly savings across Education Refinance Loan customers whose payment amounts decreased after refinancing, calculated by taking the monthly payment prior to refinancing minus the monthly payment after refinancing. We excluded monthly savings from customers that exceeded $4,375 and were lower than $20 to minimize risk of data error skewing the savings amounts. Savings will vary based on interest rates, balances and remaining repayment term of loans to be refinanced. Borrower’s overall repayment amount may be higher than the loans they are refinancing even if monthly payments are lower.

2.57% – 6.98%3Undergrad
& Graduate
Visit SoFi
2.47% – 5.87%1Undergrad
& Graduate
Visit Earnest
2.47% – 8.03%4Undergrad
& Graduate
Visit Lendkey
2.80% – 6.22%2Undergrad
& Graduate
Visit Laurel Road
2.48% – 6.25%5Undergrad
& Graduate
Visit CommonBond
2.57% – 8.17%6Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.