Improving your bad credit isn't something you can achieve overnight. It will likely take years before your credit score fully recovers.
We get it: You’re sick of staring at a credit score that’s stuck below 600. It makes it more difficult to deal with financial emergencies and more likely that you’ll get stuck in a cycle of debt!
And yet, while you’ve gotten better about managing your money, your score won’t seem to budge. How long do you have to wait before you’ll see your score improve? How long can bad credit last, anyway? Keep reading for the answer to that question and more …
Here’s how credit scores work.
Your credit score is a three-digit number that summarizes your perceived trustworthiness as a borrower. The most common type of credit score (and also the oldest) is the FICO score, which is scored on a scale from 300 to 850. The higher your FICO score, the better your credit.
Credit scores are based on the information contained in your credit report, which tracks your history as a user of credit. Actually, you have three different credit reports, one each from the three major credit bureaus: Experian, TransUnion, and Equifax. Your credit score can vary depending on which credit report is used to create it.
There are five main categories of information on your credit report that are used to create your score. They are your payment history (35% of your total score), your amounts owed/credit utilization (30%), the length of your credit history (15%), your credit mix (10%), and your new credit inquiries (10%).
Last but not least: Most information only remains on your credit report for seven years, after which point it drops off. And while some information—namely, filing for Chapter 7 bankruptcy— stays on your report for up to 10 years, a lot of information will stop affecting your score even before it drops off your report.
Ask yourself: Why do I have bad credit?
If you look back at those five categories of information that are used to create your credit score, you’ll notice that two categories account for almost two-thirds of your score. That’s right, your payment history and your amounts owed/credit utilization are by far the most important parts of your credit score–and so they’re also two biggest reasons why people have bad credit.
In order to improve your credit score, you will need to be responsible with your money. First and foremost, that means paying your bills on time. Second, it means paying down your debts—and that goes double for high-interest consumer debt from credit cards and personal loans. But how long your bad credit score remains will depend on which category needs the most improvement.
When it comes to paying down your debts and improving your credit utilization, the path is pretty clear: The faster you pay down your open balances, the faster your score will improve. And you should see some marked improvement once you get your open credit card balances below 30% of your available credit limits.
When it comes to late payments, you’ll have to be extremely diligent, and more than a little bit patient. Even one late payment can cause your score to dramatically dip, which means that you’ll need years of on-time payments across the board in order for your score to fully improve.
The later your bill, the worse for your score.
If you have already missed a bill payment, you shouldn’t use that as an excuse to drag your feet. According to Mike Pearson, founder of the personal finance site Credit Takeoff, the longer a bill goes unpaid, the more damage it will do to your score.
“First, late payments can stay on your credit report for up to seven years,” he began. “But how long does it actually impact your credit score? It all comes down to how many days late you are.”
“If you are 30-60 days late, then one late payment can impact your score for up to two years. But after that, the damage should fall off significantly.”
“On the other hand, if you’re 90+ days late, then your credit score could be impacted for the full seven years” Pearson continued. “When you’re late for this long, the lenders consider you a long-term credit risk and much less likely to pay back future loans on time.
“Not only that, but if your late payment falls into collection and results in a charge off, those are two additional negative items that will appear on your credit reports and damage your score even further,” he concluded.
So don’t wait—get that late bill paid pronto!
Start fixing your score now.
Unfortunately, there is no one-size-fits-all answer to the question that we posed up top. Credit scores are complex, and there are too many factors specific to each individual score for us to say with certainty how long it will take your credit score to flip from bad to fair to good.
But there are a few general rules that we’ve outlined: Almost all information will drop off your report entirely after seven years, and most information will affect your score less as time goes on. The longer that you spend paying your bills on time and digging out of debt, the more positive information there will be on your score, and the more improvement you’ll see.
Even if takes years for you to go from bad credit to good credit, there is one piece of advice we can offer: Start now. The sooner you start working to fix your score, the sooner your score will improve.
Mike Pearson is the founder of Credit Takeoff, a research-driven personal finance site for people looking to improve their credit. A proud member of the 800 Credit Club, Mike writes about practical steps that everyday consumers can take to increase their credit scores. His advice on credit repair and credit scores has appeared in QuickBooks, Go Banking Rates, and MortgageLoan.com
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The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.