How to Rebuild Credit: 7 Steps That Work (And 4 That Don't)

Short answer: To rebuild credit, pay every bill by its due date, keep your credit card balances well below your limits, and avoid applying for a lot of new credit at once. If you can't qualify for a regular card, a secured credit card or a credit builder loan can help you build a new record of on-time payments. Check your credit reports and dispute any errors for free. The CFPB says rebuilding takes time and there are no shortcuts.

A late payment, a collection or a bankruptcy can drag your credit down for years. The good news is that your credit report keeps recording what you do next. This guide walks through the steps the Consumer Financial Protection Bureau (CFPB) recommends, the products that can help, and the common moves that don't help at all.

How Do You Rebuild Credit? 7 Steps From the CFPB

The CFPB lists these steps for rebuilding your credit.

1. Pay on time, every time. The CFPB says "on time" means the payment reaches the company by the day the bill is due. If you pay by mail, mail it a few days early.
2. Keep card balances low. Credit scores consider how close you are to being "maxed out" on your credit cards. The CFPB says some experts advise using no more than 30 percent of your total credit limit, while others say you should use less than 10 percent.
3. Don't apply for too much credit in a short time. The CFPB says your score may go down if you apply for or open many new accounts in a short time, including a new card to transfer a balance or a store card to get a discount.
4. Consider a secured card if you can't get a regular card. You put down a deposit equal to your credit limit. More on how these work below.
5. Pay card balances in full each month. The CFPB says this avoids finance charges and can build better credit than carrying a balance, because it keeps you from getting too close to your limit.
6. Keep it up. Credit scores are based on your overall experience paying your bills over time. The longer you have credit and pay on time, the more information there is showing you're a good credit risk.
7. Check your reports and fix errors. If you find something wrong, dispute it with the credit reporting company and with the company that supplied the information.

The FTC sums it up the same way: you can rebuild your credit by paying your bills on time, paying off debt and not creating new debt.

What Helps Rebuild Credit (and What Doesn't)?

Not every way of paying shows up on your credit report. The CFPB explains that the payments you make on loans and credit cards are reported to the three nationwide credit reporting companies, which use them to create your credit report. Here's how common options compare, based on CFPB guidance.

Option	Does it help rebuild credit?	Why
Paying credit card and loan bills on time	Yes	Payment history is reported to the credit reporting companies
Secured credit card	Can help	Using one can help you establish a credit record
Credit builder loan	Can help	You make small payments over time while the money is held as savings
Retail or store card	Can help	Often comes with a relatively low credit limit
Debit card or cash	No	These don't help you prove you can repay debts
Prepaid card	No	It's your own money loaded in advance
Payday loan	No	Even on-time payments might not help your credit
"Buy here, pay here" auto loan	Usually no	The CFPB says these dealers often report only negative information, unless they promise in writing to report your on-time payments

How Does a Secured Credit Card Help You Rebuild Credit?

A secured credit card works like a regular card with one difference: you put up the money first. The CFPB gives an example of putting in $500, which you can then spend up to. When you pay the bill, your available spending goes back up.

According to the CFPB:

• Many banks and credit unions offer secured cards.
• With most of these cards, your credit line starts out small, and you deposit an amount equal to your credit limit.
• As you show on-time payments, your credit limit may be raised and your deposit may be refunded.
• Fees and interest rates can be high, but using a secured card can help you establish a credit record.

Because fees and rates can be high, compare a few offers before you apply. Paying the balance in full each month keeps interest from adding up.

What Is a Credit Builder Loan?

A credit builder loan is designed to build credit and savings at the same time. The CFPB describes it this way: a bank or credit union sets the loan money aside as savings instead of handing it to you to spend. You repay the loan in small payments, usually over six to 24 months. At the end, you receive the full amount you paid.

It works best when the monthly payment fits easily in your budget, since the whole point is a steady string of on-time payments.

How Long Does Negative Information Stay on Your Credit Report?

The CFPB lists how long negative information generally stays on your report:

Type of information	How long it generally stays
Late payment	7 years
Foreclosure	7 years
Chapter 13 bankruptcy	7 years
Chapter 7 bankruptcy	10 years
Lawsuits and judgments	7 years or longer

The CFPB adds that recent negative information generally has more effect on your credit score than older information. So every month of on-time payments after a setback counts.

Should You Check Your Credit Reports First?

Yes. Errors can hold your score down for no reason, and fixing them costs nothing.

The FTC says all three nationwide credit bureaus (Equifax, Experian and TransUnion) let everyone in the U.S. check their credit report from each bureau once a week for free at AnnualCreditReport.com. The CFPB also notes that Equifax offers six additional free credit reports every 12 months through December 31, 2026.

When you look at each report, ask: do you recognize every account? Are the balances and dates right? The FTC says disputing mistakes or outdated items is free. Write to the credit bureau and to the business that reported the information. Both are responsible for correcting inaccurate or incomplete information in your report.

Our guide on how to dispute credit report errors walks through the letters step by step. If the problem is a collection account, see how to remove collections from your credit report for what can and can't be disputed.

Can a Credit Repair Company Rebuild Your Credit Faster?

No company can skip the waiting. The FTC says negative information does go away over time, and that no one promising to repair your credit can legally remove information that is both accurate and current.

The FTC also says it's illegal for credit repair companies to lie about what they can do for you or to charge you before they help you. They must explain your legal rights in a written contract that details:

• The services they'll perform
• How long it will take to get results
• The total cost you'll pay
• Any results they guarantee
• Your three-day right to cancel without any charge

Warning signs the FTC names include a company that insists you pay before it helps, tells you not to contact the credit bureaus directly, or tells you to dispute information you know is accurate. The FTC says a company that promises to create a new credit identity or hide your bad credit history or bankruptcy is also running a scam.

The bottom line from the FTC: anything a credit repair company can do legally, you can do for yourself for little or no cost. You can report a credit repair scam to the FTC at ReportFraud.ftc.gov, your state attorney general or your state's consumer protection office.

What If Debt Is the Real Problem?

Rebuilding credit is hard when the bills keep piling up. The FTC says paying off debt, especially credit cards, and not taking on new debt are part of improving your credit. A few of our guides can help:

• Debt snowball vs. avalanche compares two ways to choose which debt to pay first.
• Debt consolidation vs. debt management explains your options if you need help with payments.
• An emergency fund can keep the next surprise bill from turning into a late payment.

The FTC says a reputable credit counselor won't promise to fix all your problems or ask you to pay a lot of money before doing anything. It lists credit unions, universities, military personal financial managers and Cooperative Extension Service offices as places that may offer non-profit counseling.

The Bottom Line

How to rebuild credit comes down to a few habits kept over time: pay every bill by its due date, keep card balances low, don't open lots of new accounts at once, and check your reports for errors. A secured card or a credit builder loan can help if you're starting over. Skip anyone who promises a quick fix: the CFPB says there are no shortcuts, and the FTC says you can do anything a credit repair company can legally do yourself. For more help, browse our credit and debt guides.

Frequently asked questions

How long does it take to rebuild credit?

There's no set timeline. The CFPB says rebuilding takes time and that credit scores are based on your experience paying bills over time. Most negative information can stay on your report for seven years, and the CFPB says recent negative information generally affects your score more than older information.

Can I rebuild my credit fast?

Not in the way many ads promise. The CFPB says there are no shortcuts or secrets, and the FTC says any company promising instant results for a price is likely a scam. What you can do right away is fix errors on your reports, which is free.

Does a secured credit card help rebuild credit?

It can. The CFPB says that with a secured card you put down a deposit equal to your credit limit, and using one can help you establish a credit record. As you show on-time payments, your limit may go up and your deposit may be refunded. Fees and interest rates can be high, so compare before you apply.

What is a credit builder loan?

It's a loan from a bank or credit union that helps you build credit and savings at the same time. The CFPB says the money is held as savings rather than given to you to spend. You repay it in small payments, usually over six to 24 months, and at the end you receive the full amount you paid.

Should I pay a credit repair company to rebuild my credit?

You don't need to. The FTC says anything a credit repair company can do legally, you can do for yourself for little or no cost. It's illegal for credit repair companies to charge you before they help you, and no one can legally remove information that is accurate and current.

Sources

1. CFPB: How to Rebuild Your Credit
2. CFPB: What Are Some Ways to Start or Rebuild a Good Credit History?
3. FTC: Fixing Your Credit FAQs
4. FTC Consumer Alert: There Are No "Quick Fixes" to Clean Up Your Credit

This guide is general information, not personal advice. Your situation may differ, so consider talking with a qualified professional, such as a fiduciary financial adviser, CPA or licensed agent, before making a decision.