Having a poor credit score can negatively impact many aspects of your financial life. From getting approved for loans and credit cards to renting an apartment, a low credit score indicates to lenders and landlords that you are a high-risk borrower. Thankfully, with time and effort, it is possible to rebuild and improve your credit score. So how long does it actually take to clear up a bad credit history? The answer depends on what caused the bad credit in the first place and how diligent you are in addressing any outstanding issues.
What is a bad credit score?
Your credit score is a three-digit number calculated based on information in your credit report, which tracks your history of borrowing money and repaying debts. Credit scores generally range from 300 to 850. According to FICO, a score below 580 is considered very poor and indicates to lenders that you are a high credit risk. A FICO score between 580 and 669 is considered fair. While not terrible, having a credit score in this range will make it difficult to qualify for competitive interest rates from lenders. A score of 670 or above is considered good to excellent credit, with scores above 740 providing access to the best rates and loan terms.
How long does negative information stay on your credit report?
The length of time that negative marks stay on your credit report depends on the type of negative information:
Late payments
– Paying bills 30 days or more past the due date can lower your score. Late payments typically stay on your report for seven years from the original delinquency date.
Collections
– If you have an account in collections, it can remain on your report for up to seven years from the date the account originally went to collections. Paying off a collection account will not remove it from your report, but can improve your score.
Foreclosures and bankruptcies
– A foreclosure will drop your credit score dramatically and stays on your report for seven years. Bankruptcies can stay on your report for up to 10 years depending on the type.
Hard credit inquiries
– When you apply for new lines of credit, the lender conducts a hard inquiry on your report. Too many inquiries in a short period can negatively impact your score. These inquiries stay on your report for two years.
Tax liens and civil judgments
– Unpaid tax liens and civil judgments can damage your credit score and remain on your report up to seven years from the filing date. Paying off tax liens and judgments will not remove them, but can improve your score.
How to rebuild your credit score
Rebuilding your credit score after negative marks is not easy or quick, but is doable with time and discipline. Here are some tips for improving your credit over time:
Pay all bills on time
One of the biggest factors affecting your score is your payment history. Establish on-time payment patterns by paying all bills before their due date. Many experts recommend paying bills at least 5-7 days early as a buffer. Setting up automatic payments can help avoid ever being late.
Pay down balances
High credit utilization (using a large percentage of your total available credit) will hurt your score. Try to keep balances low on each card and overall. Experts recommend a total utilization of no more than 30%. Paying down balances can quickly help improve your score.
Avoid closing old accounts
While you may be tempted to close unused credit cards, it’s best to keep old accounts open as they demonstrate a longer positive history. Just be sure to use them occasionally to avoid inactivity closure.
Limit hard inquiries
Each application for new credit results in a hard inquiry on your report. Too many hard inquiries in a short timeframe can negatively impact your score. Avoid applying for multiple new credit lines at once.
Ask for goodwill interventions
You can request credit bureaus remove negative marks that are directly caused by extenuating circumstances. This is called a goodwill intervention. Examples include medical emergencies or job loss. If approved, the negative mark is removed.
Dispute inaccurate information
If you spot any erroneous information on your credit report negatively impacting your score, start a dispute process with the bureau. If the negative item cannot be verified as accurate, the bureau must remove it.
Become an authorized user
You can quickly build your score by becoming an authorized user on someone else’s credit card. Their positive payment history will start being reflected on your credit report.
Monitor your credit
It’s important to monitor your credit report regularly and continue taking steps to improve your score over time. Request your free annual credit reports and sign up for credit monitoring to track progress.
How long until a bad credit score is cleared?
Now that we’ve reviewed techniques for rebuilding troubled credit, how long will it actually take to clear up your credit report and improve your score? Unfortunately, there is no quick fix. The average time to go from bad to good credit is estimated to be between 12-24 months. However, the recovery timeline ultimately depends on your specific situation, including:
– How low your starting score is – The lower your initial score, the longer it will take to rebuild credit. Someone with a 500 credit score has more work than someone with a 600 score.
– The number and type of negatives – The more delinquent accounts or collections you have, the more time it will take to offset them with positive payment history. Bankruptcies and foreclosures take longer to recover from.
– Age of negative marks – More recent late payments hurt more than older ones. As negative items age, they have less impact.
– Credit history length – A short credit history with limited accounts will typically recover faster than one with a long history of issues.
– Credit repair efforts – Actively taking steps like paying down balances and disputing errors can accelerate score improvement vs just waiting for time to pass.
While frustrating, try to be patient and persist in good financial behaviors as you work to rebuild credit. Do not take out new loans or credit cards you do not need just to try and artificially boost your score faster. This approach often backfires. If you stay focused on adding positive information to your report, you should see your scores slowly improve month by month until you eventually achieve good credit standing again.
General timeline examples
To give you a general idea of potential timeframes, here are some examples of how long it might take to rebuild from different credit situations:
– 6 months to 1 year – Increasing credit score after being denied for a loan or credit card. The recent hard inquiry caused a small drop in score that will recover in under 12 months with positive behaviors.
– 1-2 years – Recovering from high balances and late payments. Paying down cards, becoming current on payments, and letting negative marks age will show improvement within 24 months.
– 3-5 years – Rebuilding after financial hardship like job loss or medical issues caused severe delinquencies, collections and charge-offs. Continued good money management for a few years can significantly boost a low score.
– 5-10 years – Recovering after a Chapter 7 bankruptcy, which stays on your report up to 10 years. Time and diligent credit rebuilding can improve your score despite serious past financial problems.
– 7 years – Waiting for a home foreclosure to come off your report, which takes the maximum seven years. Good financial habits are still needed during this time to offset the negative impact.
As you can see, recovering from different credit situations takes different amounts of time. A very damaged credit report with bankruptcies, foreclosures and delinquencies could take 7-10 years of determined effort to fully recover from. But for smaller issues like a few late payments, you may see meaningful score gains in just 1-2 years.
The most important factors are diligently adding positive information each month through on-time payments, keeping credit utilization low, limiting hard inquiries, and letting negative information age off your report. With this consistent effort, bad credit scores can gradually improve until they reach good credit ranges again. Monitoring your score frequently lets you track your progress.
Conclusion
Rebuilding your credit after setbacks like late payments, collections and other negative information is achievable if you stick to positive financial behaviors. While it can be disheartening, try to be patient and persist through the process month by month. Take advantage of techniques like becoming an authorized user, disputing inaccurate information and asking for goodwill removals to help accelerate your progress. With consistent, diligent effort, you can clear up a bad credit history in as little as 12-24 months or a few years depending on your specific situation. Stay focused on the goal of good credit and continue taking small positive steps to get there.
