The best way to have a good credit score is to avoid ruining it in the first place. Paying bills on time and using your credit card sensibly are the most effective ways you can maintain a good credit record. If you have already wrecked your credit score, don’t worry! You can still rebuild it with smart financial decisions and this article will help you through it.
How long will it take?
There is no exact formula to determine how long it will take to repair your credit score.
Most people will see a noticeable improvement in their credit scores after 3 to 6 months of good credit behavior. However, it all comes down to where you start. Things such as your financial habits, the reasons for your initial low credit score, and your current debt situation will all determine how long your journey to credit recovery will be.
Below is a table estimating credit score recovery times for various events.
|Initial Event Causing Bad Credit Score||Estimated Recovery Time|
|Maxed or Closing Credit Card Account||3 Months|
|Mortgage Payments Late By 30-90 Days||9 Months|
|Missed/Defaulted Payments||18 Months|
|Home Foreclosure||3 Years|
|Chapter 7 and 13 Bankruptcy||6+ Years|
What Should I Do To Quickly Rebuild My Credit Score?
While there is no such thing as instantly repairing your credit score, there are some actions you can take to improve it:
- Make credit card and other bill payments on time. This can be done by using a planner or setting reminders online. Paying your bills on time consistently will raise improve your credit score in a few months’ time.
- Review your credit report and challenge old or wrong negative events to have them removed.
- Pay multiple times in one billing cycle if you can. Paying your bills once every 2 weeks rather than once a month will reduce your credit utilization and positively impact your score.
- If you are unable to meet some payments on time, quickly address it with your creditor. This will reduce the effects of late payment on your credit score.
- Clear maxed out cards first. Credit cards which are close to the credit limit are more detrimental to your credit score. It is advisable to pay off those cards first to reduce your credit utilization rate.
What Should I Avoid Doing?
On the flip side, there are some actions that will slow down your credit score recovery or even further worsen it. Here are some things you should avoid doing:
Do not close unused credit card accounts. A long credit history has a positive effect on your credit score. If you have no choice but to close some, close newer credit accounts.
Do not pay off “charged off” debt. When a lender deems a debt “charged off” it means that they are not expecting any future payments. Making a payment on a charged off debt will reactivate the debt and reduce your credit score.
Do not take out another loan. Taking out another loan and repaying it to improve your credit score is not recommended. This is because it will not have a big impact on the overall credit score calculation.
Having a bad credit score is not the end of the world. Just like any other problem in life, it can be solved if you quickly take the right actions. You need to assess your financial habits and find the best ways to improve your credit standing.