Improving your credit score can be a daunting job—especially if your score has taken a tumble from avoided payments or maxing out a credit card. Having a solid credit score can be vital in navigating life’s milestones, including the loans you qualify for and the interest rates you have to pay. A higher credit score can help you reach your financial goals, so repairing your credit score can be an essential step in your credit journey.
While the length of time it takes to improve your credit score will depend on your situation, there are steps that you can take to begin rebuilding your credit. Before diving into your credit score development process, it’s important to know and understand your current credit score.
Here’s a breakdown of how different credit scores are perceived:
- Poor: Below 580
- Fair: 580–669
- Good: 670–739
- Very Good: 740–799
- Excellent: 800 and above
Now that you know the basics of what is considered a solid credit score, we’ll show you the many factors that affect your score and how you can start improving it.
When it comes to repairing your bad credit score, there are a few things you need to take into consideration that will immediately affect how long it will take to enhance your score. Here are a few factors to keep in mind.
- Your current credit score
It can take longer to improve a negative score than it does to build a new score from scratch. The good news is that it’s easier to increase a credit score in the fair or poor score range than raise a credit score a few points when it’s in the good and very good range.
- Your monthly payment habits
Another important factor in your credit score is your monthly payment habits. To improve your score, you need to add positive information to your credit report each month. You can do this by making payments on time, keeping your credit utilization at a healthy level, and making more than the minimum payment each month.
- The length of your credit history
The length of your credit history is generally equal to the average age of your credit accounts. The longer an account has been open, the better, particularly if you keep your balance low and make timely payments. In many instances, this means that it could be better to keep your old credit accounts open rather than closing them.
- Recent credit card applications
Each time you apply for a new credit card, a card issuer pulls your credit. This is known as a hard inquiry and is reflected in your credit report. Applying for one credit card over the course of a year or more likely won’t make a significant impact on your credit score. But if you apply for multiple cards over a shorter time frame, those negative points can rack up and lower your overall score.
- Your credit score goal
If your goal is to move from a poor credit score to an excellent credit score, you may have a much longer path ahead of you. However, small raises in your score frequently can be achieved faster. Your credit score goal is entirely up to you and your financial situation. Still, it might be helpful to set a more reasonable plan that you can constantly adjust as your score rises.
Tips for recovering from negative items are those that can lower your credit score. Some examples of negative items are late payments, delinquent accounts, and bankruptcies. These actions often come at a different cost to your overall score and can affect the length of time it takes to improve. Although your credit score information is updated every 30 to 45 days, old items can stay on your report for longer.
To keep in mind, older negative items (say, a missed payment from three years ago) are weighted less than newer negative items (for example, applying for a new credit card last month). This means that if you commit to practicing good credit habits, you can likely pull your score up quicker than you might think.
Negative action Average recovery time
- Applying for credit 3 months
- Maxing out a credit card 3 months
- Closing out an account 3 months
- Missed payment 18 months
- Bankruptcy 6-plus years
While it’s hard to pinpoint how quickly your score can go up because it varies case by case, here’s a general idea of what you can expect as you begin your credit repair process. There are, of course, no guarantees with credit scores, so only use the following timelines as a rough estimate.
An excellent first step to improving your credit score is to pull your credit report. You can typically get a free annual credit report from the three major credit bureaus, TransUnion®, Equifax®, and Experian®. (Through April 2022, you can access each report for free once a week.) While this report won’t include your actual score, it will show you any negative items accrued on your credit history. This is known as a soft pull and generally has no impact on your credit score.
Reviewing your credit report is an opportunity to see any areas you can improve on when making payments or lowering your credit utilization. Another reason why verifying your credit report is an excellent opportunity to catch any errors on your report so you can work to have them corrected.
Once you have your credit report in front of you, you need to be on the lookout for outdated information, such as your address, phone number, or employer information. It would be best to watch out for any incorrect information, as it might mean that someone is using your personal information without your consent. You may be able to file disputes with all three credit bureaus if you notice an error on your report.
Your credit or loan account can become delinquent when you miss a payment. Some creditors report delinquencies to the credit bureaus after the payment is 30 days late. Late payments are a negative item that can affect your credit score. Suppose you have delinquent accounts on your credit report and disagree with them. In that case, you may consider submitting disputes to the credit bureaus. You may also negotiate with the creditor or collection agency to remove the delinquent account from your credit report.
Credit card utilization accounts for 10 percent of your credit score. A good rule of thumb is to keep your credit card utilization below 30 percent of your credit limit. The lower you can keep your balance, the better your credit card utilization will look to credit bureaus. This can positively impact your overall credit score if you can stay consistent with keeping your utilization low.
It can be hard to get out from under a large outstanding credit card balance. Often, minimum payments only slightly chip away at the debt owed, and interest rate charges erase the small headway you made that month. By making a budget and payment plan that works for your finances, you can begin to pay off debts. You could also try to negotiate your credit debt with your credit card company. While this is more of a last resort, it can help you handle rising debt.
While the steps above are great ways to take charge of your credit score improvement, repairing your credit score isn’t a one-and-done task. To ensure you have a high credit score for the years to come, you’ll need to become diligent in monitoring and being savvy with your credit. Here are a few ways you can keep your credit score healthy in the years to come.
Knowing your score is the first step in discovering problems and making informed decisions regarding your finances. Keep a close eye on your score and watch for any significant dips so you can get to work correcting any errors or putting a stop to fraudulent activity.
Setting up automatic payments for your credit card is an effective way to ensure you don’t miss payments. Most credit card companies have this option—you can set it up online or within your credit card app.
While it’s excellent advice to pay your monthly credit card balance in full, sometimes that’s easier said than done. The average credit card balance for consumers in 2021 is $5,315, according to ValuePenguin. Since credit card utilization plays a role in your credit score, it’s crucial to start lowering your balance as soon as you can.
By keeping track of your monthly spending with a budget and only spending what you can pay off on your credit card, you can start to bring down your monthly balance. This will take some time and commitment, but once you begin to see that balance go down, you’ll feel motivated to continue working at it.
Improving your credit score is a marathon, not a sprint. By taking steps today to help build your credit score, you’ll start seeing a difference in your score. While it’s a big task that takes close monitoring of your credit score and implementing a plan to pay off your debts, your future self will thank you when you finally see that “excellent” credit score on your report.