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Improving your credit score can be a daunting task—especially if your score has taken a tumble from missed payments or maxing out a credit card. Having a healthy credit score can be a key 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 open doors for you to reach your financial goals, so improving 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 you dive into your credit score improvement 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 good credit score, we’ll show you the many factors that affect your score and how you can start improving it.
Factors that affect how you can improve your score
When it comes to repairing your damaged credit score, there are a few things you need to take into consideration that will directly impact how long it will take to improve your score. Here are a few factors to keep in mind.
1. 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 move up a score that is in the fair or poor score range it is to move a score up a few points when it’s in the good and very good range.
2. Your monthly payment habits
Another important factor of 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.
3. 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 have been keeping your balance low and making payments on time. In many instances, this means that it could be better to keep your old credit accounts open rather than closing them.
4. 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 big 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.
5. 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 oftentimes can be achieved faster. Your credit score goal is entirely up to you and your financial situation, but it might be helpful to set a more reasonable goal that you can always adjust as your score rises.
Tips for recovering from negative items Negative items are those items 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.
One thing to keep in mind is that 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 faster 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.
Actions you can take to start improving your credit
A good 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 actually access each report for free once a week.) While this report won’t include your actual score, it will show you any negative items that have 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 that you can improve on when it comes to making payments or lowering your credit utilization. This is also a great opportunity to catch any errors on your report so you can work to have them corrected.
Correct errors on your credit report
Once you have your credit report in front of you, you need to be on the lookout for any information that is outdated, such as your address, phone number or employer information. You should also watch out for any information that is incorrect 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.
Handle delinquent accounts
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 affects your credit score. If you have any delinquent accounts on your credit report and you disagree with them, you may consider submitting disputes to the credit bureaus. You may also try to negotiate with the creditor or collection agency to remove the delinquent account from your credit report.
Lower your credit card utilization
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 have a positive impact on your overall credit score if you can stay consistent with keeping your utilization low.
Make a payment plan—and stick to it
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 get a handle on rising debt.
Raising your credit score for the long haul
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 great 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.
Check your score regularly
Knowing your score is the first step in discovering problems and making informed decisions when it comes to 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.
Set up automatic payments
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.
Keep balances low
While it’s great advice to pay your monthly credit card balance in full, sometimes that’s easier said than done. In fact, 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 important 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 start 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 work toward building 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.
Reviewed by Shana Dawson Fish, Associate Attorney at Lexington Law Firm. Written by Lexington Law.
Shana Dawson Fish is an Arizona native whose family migrated from Guyana. Shana graduated from Arizona State University in 2008 with her Bachelor’s Degree in Criminal Justice & Criminology, and in 2012 she graduated from Arizona Summit Law School earning her Juris Doctor. During law school, Shana was a Judicial Intern at the United States District Court for the District of Arizona and the Maricopa County Superior Court. In 2016, Shana was awarded a legal defense contract and represented clients as a Trial Attorney in juvenile proceedings. Shana has experience in litigating numerous trials and diligently pursuing the rights of her clients. As a Trial Attorney, Shana identified the needs of her clients and also represented debtors in bankruptcy proceedings. Shana is licensed to practice in Arizona and is an Associate Attorney in the Phoenix office.
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