How Long Does It Take to Repair Bad Credit?
People with bad credit wonder just how long it takes to repair a bad credit score. Technically, you don’t repair a bad credit score, you repair your credit history. That improved credit history results in a better credit score.
How long does it take to repair bad credit? The specific length of time it will take you to rebuild your credit history depends mostly on the reason behind your negative credit or bad credit score. Most often, negative changes in a consumer’s credit score happens because a piece of negative information is added to the credit report. Delinquencies, credit accounts being moved to collection agencies, and too many credit inquiries are the most common causes of bad credit. All of these common negative elements on your credit history continue to drag down your FICO score until they hit a certain age.
- Account delinquencies remain on your credit report for up to seven years.
- All information of public record (bankruptcies and other legal problems) stay a part of your legal credit report for seven years. Remember that some bankruptcies stay on your report for up to 10 years, and unpaid liens thanks to tax problems are on your credit report for fifteen years.
- All credit inquiries remain on your credit report and effect it negatively for up to two years.
That basic information doesn’t cover every possible reason for bad credit, and it doesn’t take into account steps that consumers can take to improve their bad credit. The major credit reporting bureaus are required by law to respond to any requests involving incorrect or old information in 30 days or less, and sometimes that bad information is removed from your credit history pretty quickly, resulting in an improved FICO score in as little as a month.
Steps You Can Take to Improve Your Credit Score
Remember that your credit score is based on your credit history, a group of details about your financial life that reflect credit account payment patterns over time. Credit scores take the most recent information into account, though old negative marks still impact your credit history.
Though it may take five to seven years for these tips to really impact your overall credit history, you have to start to improve your credit somewhere.
- Pay all of your bills on time. Remember that accounts with your local power company and your cable TV service are still credit accounts, and your payment history with these accounts affects your credit as well. Delinquent payments to your power company and even collections accounts with the local library often have a seriously bad impact on your overall credit score. Starting to make current payments now can improve your credit score in just a few years.
- Keep all of the balances on your credit cards and other kinds of revolving credit as low as possible. That means making more than the minimum payment on all lines of credit. Having high outstanding debt on revolving lines of credit has a nasty impact on your credit score.
- Don’t apply for new lines of credit you don’t need. Hard credit inquiries, the kind caused by lots of applications for credit accounts, affect your credit score for two years. Ignore the advice you’ve heard about having a credit mix–the positive impact of a mixed bunch of credit will be counteracted by the number of hard inquiries on your credit report.
- Avoid moving debt around from credit line to credit line, and pay it off instead.
- Don’t cancel unused credit cards or credit accounts. When you pay off a credit card, cut the card up but don’t close out the account. Having fewer open credit accounts might actually hurt your score in the long run.
- Be on the lookout for identity theft. That means tracking your bills and reading your credit history more than once a year, especially when you’re trying to repair your credit history.
Paying Bills On Time to Repair Bad Credit
You can improve your credit score in as little as twelve months by starting to pay all of your bills on time. Credit counselors say that paying all your bills when they’re due is the most important factor in people who have good credit scores. Here are the other positive effects of paying your bills on time:
- Minimize outstanding debt–paying bills down to a zero balance every month reduces the amount of debt you owe that shows up on your credit report
- Avoid overextending yourself–if you pay your bills on time now, you’re less likely to take out a line of credit later to consolidate debt or pay overdue bills. This also helps you to keep from applying for credit needlessly and racking up hard credit inquiries that lower your score
All of the negative information on your credit report–late payments, bankruptcy, divorce, too many hard inquiries–can be solved through time. Paying your bills on time and waiting for the negative info on your credit report to age out is the best attack plan for improving a poor credit history. In seven to ten years, all of the negative stuff on your credit report will be gone, and your on time bill payment history and reduced credit inquiries will make a drastic change to your FICO score.
Put simply, there is no quick fix to credit problems. The Federal Trade Commission goes out of their way to remind consumers that there’s no such thing as a credit repair–only corrections to credit report errors and long-term lifestyle changes can improve your credit over time.
How Specific Changes to Your Credit History Affect Your FICO Score
For example, if you pay off and close two credit cards, it reduces your revolving credit which can be a step in the right direction. Unfortunately, closing those two accounts also decreases your total line of available credit. Without getting too deep into the credit bureau’s financial algorithm, closed accounts result in a higher credit utilization rate. This rate, also known as the balance-to-limit ratio, causes a reduction in your credit score when you close out lines of credit.