How to Raise a Bad Credit Score to Save Money

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Have you ever consider how a bad credit score could be affecting your finances? Credit bureau Experian considers a credit score between 300-579, a bad credit score.

If you’re currently working your way towards a debt-free life, then chances are you may not have always had the best personal financial habits. Or maybe you have always been great at managing money, but life throws you a curveball, and you ended up with significant unexpected debt from medical expenses. No matter what the case may be, considerable debt not only leaves you with the burden of paying off these balances, but it can negatively affect your credit score and cost you even more money.

Using credit repair software like DisputeBee can help you raise your bad credit score, or you can also do it on your own if you have the time, patience, and don’t mind doing some research. First, we’ll explain how fixing your credit can save you money, and then we’ll cover how to begin the process.

What’s wrong with a bad credit score if you’re not taking out new loans?

Having a bad credit score doesn’t only stop you from acquiring new forms of credit (and if you’re trying to be debt-free, you won’t be applying for new credit anyway) — but it can also have effects in other areas of life.

 A Bad Credit Score affects the following:

  • Getting an apartment. If you have bad credit which includes charge-offs and collections, this can stop you from being accepted as a tenant. You might have to find a cosigner, pay a larger security deposit, or pay an increased amount of rent.
  • Auto insurance. Often times, when you apply for auto insurance, your credit will be checked. Having a bad credit score can result in inflated premiums.
  • Starting a new business. If you want to start a new business and accept credit cards, then a credit check will be required to get approved. If you fall below the minimum requirements, you could be denied or face increased fees.
  • Existing loan interest rates. As you’re paying off your debt over time, a high credit score which continues to go up will allow you to refinance existing debt such as auto loans to get lower interest rates. This will quicken the overall pace at which you can repay your debt and save you money.

The point is, your credit affects your life in more ways than you think. As you’re slowly paying off your debt, it would also be a great time to think about how you can fix your credit in the process.

Next, we’ll take a look at some common scenarios that can be lower your score significantly.

Collections on Your Credit Report

If you have past debt that you defaulted on (which usually means you failed to make a minimum payment for six months), then that debt was most likely charged off and written off as a loss by the original creditor. That original creditor then sells your debt to a third-party collection agency at a discount, but you still owe the full balance to the collection agency.

This leaves two negative marks on your credit report: (1) the original charged-off account, and (2) the brand new collection account. There are at least a few ways to handle collections on your credit report.

First, you can negotiate payment in return for deletion of the collection from your credit report. This involves sending a letter to the collection agency stating that you are willing to pay the full balance of the collection in return for their deletion of the accounts from TransUnion, Experian, or Equifax. 

If it’s a small balance, this may even be more preferable than settling this debt for a lower amount (which is another common way people pay off collections, except the negative remark will still remain on your credit report moving forward).

Secondly, you can dispute collections with credit bureaus. Collection agencies are required to follow strict guidelines set by federal law, and if a collection agency is reporting inaccurate information about your debt (such as an incorrect balance, date of original delinquency, etc.), then you can have this removed from your credit report. 

This requires sending dispute letters to the credit bureaus such as TransUnion, Experian, and Equifax as well as directly to the collection agency. You will want to include all of the associated account information, as well as what particular pieces of information you think may be inaccurate.

If you successfully get a collection removed from your credit report by way of disputing that account – be aware that you still may be liable for the debt to the collection agency until the statute of limitations expires. However, they will most likely not pursue collection of that debt unless it was an extremely high balance – in which case it may be better to negotiate a settlement instead of disputing that collection. Collections will typically be removed from your credit report after seven years.

Excessive Amounts of Inquiries

If you’ve had a habit in the past of applying for new forms of credit, getting denied, reapplying somewhere else, etc., — then you probably have a lot of inquiries on your credit report. Having too many inquiries on your credit report can lower your score, sometimes by up to 3-7 points per inquiry.

One especially common scenario is applying for an auto loan directly at the dealership. Even though you expected them to only apply for a loan with a specific bank or lender, your credit may have been checked by 5-10 or even 15+ lenders! These will all show up on your credit report and will immediately lower your score.

Known also as “hard inquiries,” these items will fall off your credit report naturally after two years. Depending on your financial situation, you may want to try and get them to fall off your report sooner rather than later.

To dispute inquiries on your credit report, again you will need to send letters disputing these items straight to the credit bureaus as well as the companies that pulled your credit. A successful dispute will result in the removal of inquiries from your credit report. If the inquiries are valid to your knowledge (i.e., you actually applied for credit), then you are still legally allowed to challenge these items – but your success may be limited.

However, often, creditors do not follow proper guidelines on documenting what’s referred to as permissible purpose. If the entity that checked your credit did not document this permissible purpose correctly, then you have a solid footing for disputing those inquiries. In your letter, you will want to ask the credit bureaus to investigate whether or not the entity who pulled your credit had demonstrated this type of permissible purpose.

Late Payments

If you have accounts with delinquent payment histories, this will also significantly lower your credit score. One way to potentially get these payments off of your credit report is to write a letter called a goodwill letter.

This is a short, polite letter that gets sent to the creditor and explains why you made a late payment. If you have an account in good standing with a generally good payment history and only have one or two late payments, then this strategy can work quite well.

How to Write Dispute Letters to Credit Bureaus

Writing dispute letters to credit bureaus can be a time-consuming process, and requires a fair amount of research – but this time and effort will pay off in the future.

For example, when you write a letter to dispute a collection with a credit bureau, you will want to reference laws from Section 609 of the Fair Credit Reporting Act. On the other hand, when you write letters disputing inquiries on your credit report, you will end up referencing Section 604 of the Fair Credit Reporting Act.

When you write letters directly to collections agencies, you’ll be referencing a law called the Fair Debt Collection Practices Act.

Understanding the laws relating to credit reporting and debt collection agencies is outside the scope of this article (several more articles could be written on the subject!), but this gives you a base point to start your research.

Another option in addition to writing these letters yourself is to use credit repair software like DisputeBee. Using credit repair software allows you to organize, manage, and track all letters you send and receive from credit bureaus. It also makes the process of generating correct dispute letters extremely easy. Sending pre-written dispute letters is as simple as pointing and clicking to generate carefully crafted letters that are designed to maximize your chances of a successful dispute.


Taking these step to repair your bad credit score will allow you to save money in various facets of life, as well as allow you to pay off your debt quicker by refinancing existing debt at lower interest rates.

It is entirely doable on your own (for free), as long as you’re willing to spend some time researching and writing letters. If you would rather use the aid of credit repair software like DisputeBee, then you will end up saving a lot of time and likely get better results.