How Long Does It Take to Repair Credit? When you’re applying for a loan or a credit card, whether you’ll be granted it or not depends completely on your credit, which makes credit very important. People often end up with bad credit because of bad financial decisions, and even due to some incidents such as major illness or divorce.
Irrespective of the cause, bad credit isn’t something you want, and it takes away the option of taking a loan entirely. There are some great ways of repairing credit, but the process can be very lengthy.
Today, we’ll talk about the different methods of repairing credit, and we’ll answer the frequently asked question, “How long does it take to repair credit?”
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What’s Bad Credit?
Bad credit usually refers to a history of charge-offs or late payments. When you fail to pay your debt in a long time, the creditors determine that you won’t be able to pay it anymore, and it’ll be counted as a charge-off. These end up damaging your credit score.
If your FICO credit score is below 579 and above 300, it’s considered as a bad credit score. To get a good credit score, you need a FICO credit score that’s over 670. The maximum FICO credit score is counted as 850.
The factors that can determine your credit score is:
- Whether you paid late or not
- Your credit utilization ratio, that is, how much you’re borrowing in comparison to how much you have in your credit
- Amount of payment each time. Whether you pay off the bare minimum or pay the entirety at a time makes a huge difference
- Open lines of credit you currently have
Then again, whether a negative report will affect your credit or not depends on the age of that report as well. Here’s a list stating the years up to which a report can affect your credit:
- Charge-offs last up to 7 years
- Late payments made earlier will affect your credit up to 7 years
- Settled accounts stay on credit report up to 7 years
- Closed accounts stay on the credit report up to 10 years
- Foreclosure stays up to 7 years
- Chapter 7 bankruptcy filings remain up to 10 years
- Hard inquiries for new credit stay only 2 years
- Bill sent to collection agencies remain up to 7 years
Find Out What’s Wrong
When you’re low on credit score, you should find out the areas where you can improve first. To do this easily, ask for a copy of your credit report. These reports come free of cost. In this report, you must look for areas where you can improve.
For example, if you have multiple open credits running simultaneously, you should start paying off the credit with the highest interest ratio. This not only will take a burden off of your shoulders, but it will lower the ratio of credit utilization as well.
How Long Does It Take to Repair Credit?
There’s no fixed time for this. The time required to repair credit depends on the pace at which you’re rebuilding your credit. While this process can take a few months for some people, it can take years for some others. Here are some ways to improving your credit score:
1. Check the Information on Credit Report
If you’re low on a credit score, you should ask for a free credit report of yours. Sometimes there can be errors in these reports, and errors can affect you negatively. Scrutinize your credit report thoroughly to find out whether there’s any error or not.
2. Create a Payment Strategy
If you’re using multiple credit cards, then is applicable for you. The credit scoring structure rewards the user if their credit utilization ratio is below 30%. So, if you’re using two credit cards where one has a ratio of 40% and another has a ratio of 20%, you should pay off the card with a higher ratio to take that below 30%. This will reduce your utilization ratio below the recommended threshold and will award you credit scores.
3. Maintain a Good Credit Utilization Ratio
The recommended threshold of credit utilization ratio is 30%. If your credit utilization ratio is below 30%, you’ll be rewarded with good credit scores. That’s why you should always maintain your credit utilization ratio below 30%.
4. Don’t Close Any Account Unless You Need to
The length of credit history has a considerable impact on your credit scores, precisely 15%. This means the older your credit history will be, the better score you’ll be rewarded. The credit scoring model takes this as you have developed a sign of trust and satisfaction between the creditor and yourself.
That’s why we always recommend you stick to the older accounts. Then again, closing an account down can also lower your credits, which will automatically increase your utilization ratio.
5. Pay Your Bills on Time
The payment history determines 35% of your credit scores, making it one of the most important factors. So, you should start paying your bills time today! Then again, paying positive bills affect your credit score positively up to a year, and it’s a great way to increase your score!
6. Open up a Secured Card
If you’re new to credit cards and have relatively low credit, you can open a secured card. If you keep your expenditure minimum, you’ll receive a credit score boost from these cards. Yet, you need to maintain the other credit lines to get the scores.
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Conclusion
Credit agencies update the scores after a 30-day cycle. So, you should start following the mentioned methods from today. “How long does it take to repair credit?” No one can say for sure. However, if you can manage to follow the aforementioned guidelines, thus a good credit ratio, you’ll be in a safe spot in a matter of months.