Ask Bill your personal finance question

Information on How to Rebuild Credit with Limited Income

I am a full time student, so my income is limited. I want to fix my credit, where do I start?

I am 21 years old. However, my mother used my credit and she basically ruined it. I am still young and I want to fix my credit by making one monthly payment. I am a full-time student, so my income is limited. What should I do? I estimate my overall debt to be around $5,000.

Read full question
Bill's Answer
(4 Votes) | Find Learn Save

  • Get a secured credit card.
  • Correct any errors on your credit report.

I am glad that you are taking steps early on in your life to do what it takes to get your credit straightened out. Most young students do not realize the importance of a good credit score and come face to face with the realities only when it is too late. At this point I do not recommend that you take out loans to pay off your debt, that is not going to help your credit situation. Moreover, because of your bad credit, I don't think you will get a loan for a low interest rate, even if you got one for the amount of $5,000. Pay off the highest interest debt first and then move down the list from highest APR to lowest APR until they are all paid off. The logic is that the card that charges you the highest interest eats up the most share of your hard earned income on just interest and fees.

While you are paying the debt off, also work on your credit. Building and maintaining a good credit score requires diligent effort and a long-term commitment to financially sound living. There are several steps you can take to help improve your credit rating.

First, you should obtain a copy of your credit report from each of the three major credit bureaus: Experian, Equifax, and TransUnion. You can request free copies of your reports by visiting

Once you obtained copies of your reports, you should carefully review them to make sure that all the accounts that are listed there, especially the listings appearing in the "derogatory" category, belong to you and are being reported accurately. Credit reports are notoriously inaccurate, with consumers frequently finding listings of derogatory accounts that never belonged to them or that were paid off years ago. If you find any inaccurate listings, you should dispute them with the appropriate credit bureau. The Federal Trade Commission provides a comprehensive guide to disputing items on your credit report, available at Clearing up inaccurate derogatory accounts may significantly improve your credit score, depending on the number of inaccurate listings you find on your reports.

Next, you state that you have a past due account, you should try to pay off that account as soon as possible. While paying off this account will not make it fall of your report, it should improve your credit by reducing the amount of delinquent debt reporting to the bureaus and preventing the accounts from continuing to be reported as delinquent.

Finally, if you do not already have a long, positive credit history, you should begin to build one. You can start by opening a few small credit card accounts, making charges on them, and paying off most, if not all, of the balances each month. By doing this, you will show yourself to be a responsible user of credit, and your credit score should improve with each month you continue to show a positive payment history. If you find that you cannot obtain a traditional credit card because of credit problems, a secured credit card, in which you deposit cash in an account as collateral for the credit line, can help build a positive credit history.

To learn more about credit and strategies to improve your credit score, I encourage you to visit the Credit Resources page.

I hope that the information I have provided helps you Find. Learn. Save.



(4 Votes)

People also like to Read

Daniel Cohen

Credit Card Counseling | Credit card counseling has helped millions of people resolve their debt problems. Learn more about c... Read more >>

Betsalel Cohen

There are many ways to get debt help, and Bill has given advice on each one of them.... Read more >>

Mark Cappel

Learn all about credit card debt consolidation loans and find a reputable lender from - your source for saving mone... Read more >>

Daniel Cohen

Having an IRS tax lien or a State Tax Lien filed against you demands quick action. Free tips from ... Read more >>


1500 characters remaining