I have bad credit, score is in the mid 500s, and I have been paying off old debt accounts. There are still a few left to pay, but what I want to know is what will raise my credit score, how much can it be raised, as I want to buy a house in a few years. How can I ensure my score is the best when I try to get a mortgage?

I have no credit cards. Would getting a low balance one, paying utilities with it, and paying it off every month help my score with that revolving balance? What tips or other things should I do to boost my score?

  • Please read the following books before looking at improving your credit score: Total Money Makeover, Millionaire Next Door and Everyday Millionaire. You can get these from the library for free. They'll show you how, if you want to become wealthy, you'll need to avoid debt.
    – Adam Klump
    Commented Feb 4, 2019 at 5:38

5 Answers 5


I think the other questions on credit-score tag can help you a great deal, specifically, this question


A far bigger concern should be your down payment. If you can put 20% down and you have 6 month's worth of cash saved, I guarantee you can get a mortgage.

If you don't have a down payment but you have six month's worth of cash, you can still get a mortgage, but the terms won't be nearly as favorable for you.

If you don't have six month's worth of cash, you should focus on that before you try to buy a house.


Credit score is determined by # of open accts, % of credit used and credit history.

  1. Opening an acct drops your score by ~15 pts, so don't do that unless you have a good reason to do so.
  2. Credit utilization - This is the % of available credit you're using. If you have 5 cards with $10k limit each, then you have $50k in credit available. If you're using (owe) more than 40-50% of that amount, it'll be a drag on your score.
  3. Pay your bills on time, don't close old accounts if you can avoid it since that could shift your length of credit history which is a negative (someone paying their bills for 10 years is more reliable than someone with only 1 year of consistent behavior).

Since you don't have any cards, yeah I would say get one. Your score might be low b/c you don't have much of a history, which having a card will help over the next couple years. Having a card would also boost your credit level and thus reduce your credit utilization level.


Opening a credit card would help your score in the long run***, but:

  1. Based on your low score, you will paying a sizable yearly fee for this benefit. You pay this fee forever or you (eventually) lose the benefit of this card to your credit.

  2. It does not matter whether you use the card. That's a myth.* Putting it in a drawer has the same benefit.
    benefit: Having the card as long as possible.
    benefit: Having a $0 balance on the card with no late payments

*You MAY want to use once initially to make certain it is active.


  1. Look into a "secured loan". Credit Unions sometimes have this. Essentially you pay to borrow your own money. You give the bank $500. They loan you $500, and you pay that back plus interest.

  2. Someone with good credit can add you as an authorized user to their credit card. You do not have to have possession of the card or use it.
    (Effectiveness varies, but this helps in most instances. Obviously the card should carry no balance and have perfect payment history.)

  3. Wait (7 years) and do everything like you should. Always sign up for Auto-Pay! An overdraft is better than a late payment!

  4. Pay (significantly) for credit repair. This is not cheap and is immoral if you are removing correct items. (Perfectly legal however.)

---- The 20% down advice is applicable for you. Essentially you've shown that you are a bad credit risk. Now it's up to you to prove in as many ways as possible that you've changed. - You are asking to be loaned a large sum of money after all.

***Opening a card can drop your score in the short-term. In your case it may or may not have any immediate effect. Either way, it will greatly help your score in a year or two if it has a zero balance with no late payments.


There are two ways to use your credit score to get banks to give you a mortgage.

  1. Be honest: Finish paying off your old debts, and wait 1 year from the payoff date. If you have no outstanding debts and no black-marks on your credit score, then your credit score will drop to 0 since there will be insufficient data to base the calculations on. This will force the bank to do an old-fashioned underwriting (look at your savings, income, etc), and you should be good to go - assuming you pass.

  2. Be trouble: Get your "I love debt" score way up by opening cards, getting lines of credit - and get all of them to within roughly 3/4 of your limit, and maintain that balance for a period of time (about a year or so) while paying the minimum payment every time, and without missing a payment. This will push your "I love debt" score to a high point, and the bank will gladly give you more debt without really looking at whether you can afford it.

  • 9
    Both those statements are factually inaccurate. Commented Jul 27, 2011 at 21:01
  • I see another Dave Ramsey fan on here. Yes your item 1 is accurate and the better (from a wealth building perspective) long term route. Your item 2 should be edited. While a bad long term strategy for building wealth, they can pay off the balance every month and still build their score. A resource for the original ? holder: daveramsey.com/blog/the-number-one-way-credit-score
    – Adam Klump
    Commented Feb 4, 2019 at 5:31

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