Having a bad credit score can feel like a huge burden when you’re trying to access credit or apply for a loan. A low credit score indicates you are seen as a risky borrower by lenders, often leading to higher interest rates or rejection. The good news is that it is possible to rebuild your credit and get back on track. With some time and focused effort, you can recover from a bad credit score.
What constitutes a bad credit score?
In the United States, FICO credit scores range from 300 to 850. In general:
- A score below 580 is considered poor or bad
- A score of 580-669 is considered fair
- A score of 670-739 is considered good
- A score of 740 or above is considered excellent
The higher your credit score, the better interest rates and loan terms you can qualify for. A bad credit score will limit your access to credit and make any credit you do get more expensive.
What causes a bad credit score?
There are a few key factors that damage your credit score:
- Late or missed payments – Paying bills late, missing payments, or defaulting on a loan can significantly lower your score. Even one late payment can drop your score.
- High credit utilization – Using a high percentage of your available credit limits your score. Keeping balances low on credit cards boosts your score.
- Short credit history – Having a limited history with only new credit accounts can restrict your score.
- Hard credit inquiries – Applying for a lot of credit at once causes hard inquiries on your report that can lower your score temporarily.
- Incorrect information – Errors on your credit report like accounts that aren’t yours can negatively impact your score. disputing errors can fix this.
Being aware of these factors that impact your credit score helps you focus on the right areas to rebuild it.
How long does it take to recover from a bad credit score?
Recovering from a bad credit score takes time and dedication. Typically, you can expect to see meaningful improvement in your credit score within 6 months to a year if you are proactively working on rebuilding your credit. However, the recovery timeframe ultimately depends on your starting score and credit history.
For example, if your score is poor in the 300s or 400s range, it will likely take at least a year or two to get it back up into the good range above 670. The lower your starting point, the more time it takes to undo the damage.
On the other hand, if your credit score is in the fair range of 580-669, you may be able to improve it to good within 6 to 12 months by adopting smart credit habits. The higher your starting point, the faster you can improve your credit.
While you can start to see progress within weeks or months, it takes consistency over time to change your credit reputation. Be patient and keep working on building your credit history. Even after your score increases, keep up good habits to maintain your improved credit.
| Starting Credit Score | Time to Recover |
|---|---|
| 300s-400s (Poor) | 1-2 years |
| 500s (Bad) | 6 months – 1 year |
| 580-669 (Fair) | 6-12 months |
How to recover from a bad credit score
Recovering from bad credit requires some work, but these strategies can help you rebuild your score over time:
1. Review your credit reports
The first step is to check your credit reports from Equifax, Experian and TransUnion for any negative marks or errors dragging down your score. You can access your free reports at AnnualCreditReport.com. Dispute any inaccurate information with the credit bureaus to fix problems.
2. Pay down balances and lower utilization
Reducing your debt usage on credit cards and loans will improve your credit utilization rate. Get balances well below 30% of your credit limits. Pay off high balances aggressively so you can lower your utilization.
3. Make payments on time
Always pay at least the minimum on all debts and loans by the due date. Set up autopay or automatic transfers to ensure you never miss payments. One late can severely hurt your score.
4. Limit new credit applications
Too many hard inquiries from applying for new credit make you seem risky. Only apply for credit you need and avoid constantly opening new accounts. Too many new accounts can also lower your average account age.
5. Ask for credit limit increases
Rather than applying for new credit, ask issuers for credit line increases on accounts in good standing to lower your utilization without hard pulls on your credit.
6. Become an authorized user
Being added as an authorized user on a spouse or family member’s account with good standing boosts your available credit to improve your utilization and score.
7. Wait for negative marks to fall off
Most negative credit information stays on your reports for 7 years. As this information falls off, your credit score will naturally increase as long as you use credit responsibly going forward.
8. Bring current accounts out of default
If you have accounts that went to collections or were charged off, bringing them current or paying them off can remove negative status. This improves your score over time.
9. Build credit with secured cards
Secured credit cards that require a deposit help build positive payment history when you responsibly make monthly payments. This establishes credit to improve your score.
The most important practices are making consistent on-time payments, lowering debt balances, limiting hard inquiries on your report, and being patient. Focused effort over time will help restore your credit back to good standing.
Other impacts of a bad credit score
A bad credit score affects more than just your ability to access new credit. Some other common consequences include:
- Higher interest rates – Lenders charge higher rates on loans and credit cards to offset risk.
- Lower credit limits – Issuers offer lower approval limits on accounts to minimize their exposure.
- Difficulty finding housing – Landlords often check credit and may require good credit scores.
- Higher insurance rates – Credit-based insurance scores can increase premium rates for coverage.
- Higher security deposits – Bad credit means paying larger security deposits for utilities, rentals, or cell phone plans.
- Difficulty getting a job – Many employers check credit as part of background screenings during hiring.
Rebuilding your credit lessens the impact in these other areas over time. Improving your credit score makes credit more affordable, gives you better access to rental housing and employment, and even lowers your insurance rates.
Is credit repair worth it for bad credit?
Credit repair companies promise they can quickly fix a bad credit score for a fee. However, legitimate credit repair takes time no matter what. Do-it-yourself credit recovery is the most affordable option.
Credit repair services typically dispute negative items on your reports whether they are accurate or not. Credit bureaus have 30 days to respond, and may remove legitimate dings simply because they are overwhelmed with disputes. However, if verified negative items get removed, they can easily be re-reported and re-appear on your credit reports.
Long-term credit improvement depends on your payment history and using credit responsibly over time. Credit repair services often promise more than they can realistically deliver. You can write dispute letters and monitor your own credit reports for free. The money is better spent paying down balances and catching up on payments.
When credit repair makes sense
In some cases, a legitimate credit repair service can be helpful:
- If you have errors or fraudulent accounts dragging down your credit
- If you have high balances you are unable to pay down yourself
- If you have multiple legitimate negative items from financial hardship
The right company can identify errors for dispute, negotiate pay-for-delete deals on legit negative items, and give guidance on optimizing your profile. Just be cautious of services making unrealistic claims.
Maintaining good credit
Once you put in the work to recover from bad credit, maintaining your improved score over the long-term is essential. Here are some tips:
- Keep credit card balances low below 30% of limits
- Pay all bills on time – set up autopay if needed
- Limit new credit inquiries by only applying for what you need
- Monitor all three credit reports at least annually for errors
- Have long-term established credit – avoid closing old accounts
Be cautious before taking on new loans or financing major expenses. A mortgage, car loan, or debt consolidation can damage your score if not managed carefully. Think twice before co-signing loans for others or using your assets as collateral.
Keep accounts open even if not in use. Having long average age of accounts improves your score over time. Manage credit responsibly by living within your means and not taking on more debt than you can handle.
Alternative credit options with bad credit
Having bad credit limits your financing options, but there are alternatives to explore if you need access to credit. Some options include:
- Secured credit cards – Require a refundable deposit and report to credit bureaus.
- Credit builder loans – Place money in a savings account as collateral while making fixed payments.
- Secured personal loans – Backed by collateral you pledge in case of default.
- Co-signers – Creditworthy co-signer guarantees the loan to improve approval odds.
- Payday loans – Very short-term small loans with high interest, limited regulation.
- Pawn shops – Get a cash loan with an item as collateral; risk losing item if unpaid.
- 401k/IRA loans – Allows borrowing against retirement account; limits and risks apply.
These options often have higher rates or fees compared to conventional loans. Approach carefully and compare costs. Building credit should allow more affordable financing options in the future.
Conclusion
Recovering from bad credit is possible with time and diligent effort. Be proactive in disputing errors, making payments on time, lowering utilization, and avoiding new debt. Limit hard inquiries and wait for negative items to fall off your report. With a diligent approach and patience, you can rebuild your credit score and reverse the impacts of bad credit over time.
