How Long Does It Take To Improve Your Credit Score? Having good credit helps you prove your creditworthiness to potential lenders. If you are hoping to buy a house, have a good credit rating is key, as it helps you qualify for a mortgage. So if your credit score is low, indicating bad credit, knowing how long it takes to bring it up to buying a home can help you plan.
Sometimes credit repair companies promise almost instant results, claiming they will do the hard work. However, there is no secret to increasing your score and it cannot be done overnight. It is possible to increase your credit score in one to two months. It can take even longer, depending on what is dragging your score and how you are handling it. Here are step-by-step tips for a do-it-yourself credit repair that works.
How long does it take to increase a credit score?
First of all, what is considered a good score versus a bad one? Here are some general settings:
- Perfect Credit Score: 850
- Excellent score: 760-849
- Good credit rating: 700 to 759
- Correct score: 650 to 699
- Low score: 649 and less
Although the required score varies by area and type of loan, lenders typically look for a score of 660 or higher before granting a mortgage. (Learn more about the minimum credit score you need for a home loan). If you are hoping to increase your credit score quickly, here are some steps you can take.
Correct mistakes on your credit report
Correcting errors on your credit report is a relatively quick way to improve your credit score. If it’s a simple identity mistake, like a credit card that’s not yours, you can correct it within one to two months. If it is an error on one of the your the accounts, however, might take longer, as you need to involve your creditor as well as the credit bureau.
The whole process usually takes between 30 and 90 days. If there is a lot of back-and-forth between you, the credit bureau, and your creditor, it might take longer.
The first step to correcting errors is to obtain a copy of your free credit reports from TransUnion, Equifax, and Experian (the three major credit bureaus). You can do this for free once a year at annualcreditreport.com.
Next, examine your credit report for errors. If it is an error on one of your accounts, you must refute this error with the office by providing documentation to the contrary. For example, if you paid a credit card on time and the card issuer reports a late payment, look for a bank statement that says you paid on time.
Credit bureaus generally have 30 days to investigate the error. If they agree that it is an error, they will delete the item. The credit bureau may also ask you for additional information or ask you to discuss this information with the relevant creditor. If this is the case, stay on top of communications with your creditor so that you can resolve issues as quickly as possible.
Create a credit history if necessary
A low credit score doesn’t always mean you have bad credit. It may just mean that you have poor credit. In other words, you haven’t demonstrated enough credit to potential lenders, at least what they can see on your credit report.
If so, you may need to open a credit account, such as a credit card, and make regular payments. Try to get a card with no annual fee, if possible. Don’t overspend, and don’t use it as an excuse to take out loans that you don’t need.
You could get a secure credit card, for example, and pay for gas and other everyday expenses with it. To avoid paying high interest charges or taking on credit card debt, track your balance throughout the month and pay off the balance each month.
Deal with overdue accounts
If you have bad credit, bringing in overdue accounts and settlement accounts that are in collection can also increase your score quite quickly. Once the creditor or collection agency reports your account update, you should see a positive increase in your score.
Keep in mind, however, that your past due payment history will remain on your credit report for seven years. If you have bad accounts that have been on your report for six or more years, you might not want to worry about fixing or updating them. This can reshuffle the account, and if you fall behind again, it will stay on your credit report for another seven years.
“Make sure you don’t change the age of these accounts, as they will be gone soon,” says Nathan Danus, CDMP and Director of Housing and Community Development at DebtHelper in West Palm Beach, FL. Negative information usually “drops” from your credit report after seven years, so if you’re close, it’s best to wait.
Reduce your credit utilization rate
Your credit utilization rate refers to the amount you owe against the amount of available credit you have. For example, if you have a $ 10,000 credit limit on all of your credit cards and your balances total $ 9,000, you’ve used 90% of your credit. It lowers your score.
“What these consumers often have to do is pay off the balances on their existing credit accounts, which can be a challenge if they have allowed the balances to increase over time,” says Martin H. Lynch, Chief Compliance Officer and Director of Education at Cambridge Credit Counseling of Agawam, MA.
“The ratio of what is owed to the amount of credit available is 30% of the consumer’s score, so rapid improvement is possible if there is a large amount of money available to pay off balances.”
Linda L. Jacob, a consumer credit financial advisor from Des Moines, IA, recommends paying off balances to less than one-third of your line of credit. Any payments you make will be reflected on your credit report as soon as your creditors report your payment to the credit bureaus.
Scores are updated regularly and creditors usually report once a month, so if you make a payment that lowers your credit usage it should be reflected in your score within two months.
If you regularly use your credit card but want to keep your usage low so you can apply for a mortgage, you may want to pay off your credit card balance on a weekly or bi-weekly basis. This ensures that your balance is as low as possible whenever your creditor reports your payment history to the credit bureaus.
You can also reduce your card usage by getting After credit, but this approach can work against you. Consumers sometimes assume that by getting new credit their score will improve. If you have a $ 3,000 balance on a card with a $ 4,000 credit limit and you are approved for a new credit card with a $ 1,000 limit, you now have a total of $ 5,000 of lines of credit. Instead of using 75% of your available credit, you are now using 60%. It’s better no? Not necessarily.
“Fair apply for credit lowers your credit score, and this effect lasts for months, ”warns Mike Sullivan, personal finance consultant at Take Charge America in Phoenix. “During the first few months after you apply for credit, your credit score may actually go down.”
You can try to work around this problem by requesting a credit limit increase on a card you already have, instead of opening new credit. Be sure to ask them, however, if they are doing a “soft” credit draw rather than a “hard” credit draw for a credit limit increase, as tough credit applications are the ones that affect your credit history. credit.
A creditor may be willing to give you a credit line increase with a “soft” pull, which won’t hurt your score. Informal requests are for informational purposes only.
For example, a credit card company can do a soft pull to see if you qualify for certain credit card offers, or an employer can do a soft pull before offering you a job.
Soft draws can be done without your permission and will not affect your score. Difficult draws require your permission and are made when lenders or credit card companies are considering whether to give you a loan or a line of credit.
How To Boost Your Long-Term Credit Score
Short-term damage control is all about correcting mistakes, settling overdue accounts, and optimizing your use of credit to improve your credit report. Contrary to what some credit repair centers promise, you cannot remove real negative information from your credit history.
The only other things that will improve your score in the long run are time and building a perfect, or near-perfect payment history, from now on.
For example, if you tend to forget to make payments on credit card debt, you can set up automatic payments. You can set up payments to cover the full amount or a minimum amount each month. You can still pay the remaining balance when you receive the statement.
You should also check your credit report regularly, so that you can correct any errors that occur; for example by identity theft. You will also see how your efforts are paying off.
You usually don’t need to pay for a credit report. You can get a free credit report once a year. You may also be able to check your credit report or even view your FICO score for free through your credit union, card issuer, or other financial institution.
And here’s some good news for people with bad credit: In general, the people with the lowest scores will see the biggest gains the fastest.
“It’s kind of like dieting,” Sullivan says. For example, if your score is 550, “you could probably earn 30 points in a few months, if you are really dedicated and really careful,” he explains.
On the flip side: “If your credit score is already 750 and you try to get it to 780, it may take double or longer.” Still, it’s worth doing whatever you can to improve your credit history and make sure you qualify for the best possible interest rate.