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If you're worried about your debt and your credit score, you have tons of company. According to the credit reporting agency Experian, the average American household is carrying $6,028 in credit card debt.

Debt is destroying consumers' credit scores and their ability to get financing for cars and homes. Young people are hit particularly hard because of their crushing student loan debt.

Many Americans don't understand how credit scores work. Here are some dismal highlights from America's credit landscape, according to the National Foundation for Credit Counseling’s 2019 financial literacy survey:

  • Millennials have lower credit scores than previous generations
  • 61% of American adults carry some form of credit card debt.
  • Fundamental knowledge about credit scoring is in decline, with only 66% of Americans answering credit score questions correctly in 2019 (versus 80% in 2012).
  • Many people still don't understand that having a good credit score is the No. 1 factor determining their eligibility to get a loan, a house or a job.

No matter how bad your score might be right now, you can get your finances back on track.

Raising your credit score isn't rocket science. All it takes is a few calls and a commitment to pay off your debts, one day at a time.

First, let's clear up what a credit score actually is.

What your credit score is and how it works

A credit score is a three-digit number that lets banks know how responsible you are with money, and how big a risk you might be if you ever request a loan (say, for a car or a house).

The credit score you hear about most in the United States is FICO, which uses an algorithm to score you on a scale between 300 and 850.

Lenders may have their own standards of what a "good" credit score is, but a general guide is this:

300-629: Bad credit

630-689: Fair or "average" credit

690-719: Good credit

720 and up: Excellent credit

There are three major credit reporting agencies in North America: TransUnion, Experian and Equifax. You want good scores from all three credit bureaus to maximize your chances of landing a loan.

Each of the "big three" prepares its own credit reports, and you can get a free copy of yours once a year. Seeing what's in each report is a good first step toward bolstering your related credit score.

All right, are you ready to roll up your sleeves and fix your credit score for good? We're here to tell you how to do it.

How to fix your credit score

1. Review your credit history

Credit Report
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Sites like Credit Karma can offer easy access to credit reports.

One way to take stock of your history and get on the right track is to sign up for Credit Karma, a debt management service that offers credit reports, credit trackers and advanced reporting on your credit history. You also can get credit monitoring, to help minimize the risk of fraud and errors on your account.

It's important to note that a credit report does not include your credit score.

Head to Credit Soup to access a free credit score, so you can see the full picture.

With a free credit report and free credit score in hand, you've already completed the first step to repairing your bad credit score.

2. Dispute errors and outdated information

man using a pen on stacks of paper
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Double check your credit reports.

Once you receive your full credit report, go through it line by line to see if there's any outdated or incorrect information, and make a note of it.

Incorrect information may include loans you already paid off, erroneous details about how many times your credit was checked (having a lot of credit checks by lenders lowers your score), or anything else that doesn't look right.

Once you gather this information, it's time to go on the offensive and dispute every mistake. Ask for proof of any charges that are incorrect. It's common to find that the credit bureaus can't provide documentation or proof that any charges were valid.

Unproven credit charges should drop off your report completely once you give notice that they are wrong. Depending on your home state, there may also be consumer credit protection laws in place to force the agencies to help you correct any mistakes or fraud.

3. Hire professionals for the paper chase

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The next step to raising your credit score is to call in the professionals

The next step toward raising your credit score is to call in the professionals. (You can skip this part if you find only a few errors on your credit report or if you manage to get all the mistakes removed.)

If you've run up significant debt on multiple credit cards, consider hiring a legal service to track down documentation on your behalf, so you can dispute all the errors efficiently and completely.

Many creditors fail to keep proper records of past debts. An attorney can help weed out charges that have no supporting documentation on file with the creditor.

You'll have to wait about a month to see the effect on your credit score, but you'll be surprised to see how quickly it goes up just from fixing the errors. Seeing progress at this stage can be a huge inspiration to keep up the effort to improve your credit score.

3. Get a secured credit card

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Secured credit cards are like training wheels for credit building.

A secured card works like this: You make a deposit (let's say $500), and the bank holds that money as collateral. Your new card then has a limit of $500. You use this card like a regular credit card for a few months, making sure to pay off the card in full every month.

In effect, you're rebuilding your credit score by proving to the bank that you repay your debts. After a few months, as your score improves, you can see if you qualify for a regular, unsecured credit card. The bank gives back the $500 collateral when you switch to the unsecured card.

This tactic will build your credit quickly and help you drive up your credit score at the same time.

4. Negotiate a partial repayment

Working Out Bill Payments
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Many creditors are willing to take a partial settlement.

If you haven't done so yet, the next (and most important) step to fixing your credit score is to pay off your credit card debt. Make a budget and put yourself on an avalanche repayment schedule.

Then, sit down with your up-to-date credit report and start calling companies with delinquent or collection items in your file.

Ask to speak to a credit representative, and follow this script: “I don't have enough money right now to pay in full, but I'll give you ‘X’ to settle it right now.”

Many creditors will be happy to take 50% of the amount you owe. The standard is usually zero repayment, so 50% is a good deal.

5. Lower your credit utilization rate

Credit Report
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Keep your credit utlization rate below 30%.

When you start paying off your credit card debt, you're lowering your credit utilization rate. Credit utilization refers to how much of your available credit you're using.

For example, if you have a $1,000 limit on a card and you have an unpaid debt of $800 that keeps rolling over to the next month, you're at 80% credit utilization. (Because $800 is 80% of $1,000.)

Credit reporting agencies penalize high credit utilization, which lowers your credit score. The more you cut down your debt, the lower your credit utilization will be, and the higher your credit score.

Keeping your credit utilization at 30% or below is essential to maintaining a high credit score. Once you've paid off your debt, be sure to avoid using more than 30% of your available credit in the future.

Let's recap

To fix your credit score, you need to:

  • Take the time to fix the errors on your credit report.
  • Start rebuilding your credit with a secured credit card.
  • Keep your credit utilization low.
  • Steadily repay your debts.

That's all it takes. A few calls and a new payment plan is all you need to fix your credit score. Remember that no one expects you to pay off all of your debt immediately.

The important thing is to get organized and start repaying your debt, and your credit score will immediately begin to go up.

Getting serious about fixing your credit score can have a profound impact on your life and on your outlook for the future.