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How Long Does It Take To Improve Your Credit Score?
By Susan Doktor MONEY RESEARCH COLLECTIVE
A good credit score opens the door to many financial opportunities. From getting lower interest rates on loans to being approved to rent a property, your credit record influences your financial, professional and personal life. If you have bad credit, however, it could take a long time to improve your credit standing.
Luckily, improving your credit and maintaining a good credit score isn’t complicated once you understand the factors that affect your credit record. This article looks at how excellent credit scores are achieved and how you can improve yours.
Table of contents
- What are the factors that impact your credit score?
- How long does it take to increase your credit score?
- How to improve your credit score?
- How long does it take to improve credit score FAQs
What are the factors that impact a credit score?
The first thing you need to know about credit scores is that you have more than one. You may be familiar with the three major credit bureaus: TransUnion, Experian and Equifax. These credit reporting agencies collect your credit information in files called credit reports. The bureaus then use different credit scoring models to calculate the data in your credit reports and produce your credit scores.
The most popular credit scoring models in the U.S. lending industry are FICO and VantageScore. Both models evaluate credit data based on the same or similar criteria; they simply value credit factors differently. As a result, your FICO and VantageScores are unlikely to be the same. Moreover, since both of these models have been updated over the years, there are also different versions of each one.
With either credit scoring model, you’ll be assigned a credit score that falls on a numerical scale — generally between 300 and 800. And where you fall on that scale will define you as having fair credit, good credit, very good credit, excellent credit or poor credit.
The five factors that influence your credit score calculation are:
- Payment history
- Credit utilization rate
- Length of credit history
- Credit mix
- New credit inquiries
Understanding each of these factors will help you turn poor or fair credit into the kind of credit that will earn you higher credit limits and lower interest rates.
1. Payment history
The most widely used versions of both FICO and VantageScore place a lot of value on on-time payments and late payments. This is because lenders and creditors want to see a pattern of good credit behavior reflected in your credit history.
Making late payments is the quickest way to damage your credit score. If you tend to be forgetful about paying your credit accounts, consider setting up automatic payments from your bank account.
2. Credit utilization rate
Every credit card you carry has a credit limit attached to it. Your credit utilization rate, which is expressed as a percentage, compares your available credit to your current credit balances. To earn the best credit score, you should strive to keep your credit utilization rate below 30%.
3. Length of credit history
If you’re young and just starting out in your financial life, you may not even have enough credit history from which to calculate a credit score. Or perhaps your credit file is so thin that your credit score is in the fair range.
One way to start building credit is to get a secured credit card, which lets you deposit cash with the credit card issuer, then draw against it as you make purchases. And if you have already established credit, consider keeping old credit accounts open and active to contribute to the length of your credit history.
4. Credit mix
Two types of credit accounts factor into your credit calculation. The first is installment credit. When you open an installment account, you borrow a fixed amount of money and pay it off in equal monthly amounts. Mortgages, personal loans and auto loans fall into this category.
The second type of credit account is revolving credit — the kind that is issued by credit card companies. You can draw up to your credit limit, and your monthly payments will vary depending on what you’ve used. So long as you make the minimum payment required by the credit issuer, you can pay more or less each month.
There is a third type of credit that credit bureaus are less concerned with: open credit — the kind of credit extended to you by utility companies. Credit bureaus don’t consider your open credit payments unless you specifically ask them to. If you are in the habit of paying your utility bills on time, you can request that your open credit accounts be added to your credit file. That’s a quick way to raise your credit score modestly.
Experian offers a free service called Experian Boost. Contact the bureau and request that your utility accounts be added to your file. Similarly, FICO offers a product called UltraFICO, which monitors your bank accounts for evidence of financial responsibility. You can get UltraFICO and become scorable even if you don’t have a long credit history.
5. New credit inquiries
You have to open new credit accounts to build a credit profile. But if you open too many credit accounts too quickly, your credit score will suffer. This is because each time you open a new credit account, credit issuers make hard credit inquiries.
Hard credit inquiries or hard credit pulls are when lenders and creditors request a full copy of your credit report and associated scores. Each hard credit inquiry temporarily knocks a few points (generally five or fewer) off your score.
Opening too many credit accounts in rapid succession suggests to credit bureaus and, in turn, credit issuers that you may be living beyond your means. To assure lenders that you’re a good credit risk, try to time your new credit applications about six months apart. That way, hard inquiries will have less of an effect on your score.
How long does it take to increase your credit score?
The answer to how long it takes to increase your credit score depends on how serious your credit troubles are and what’s behind them. If your only problem is having past-due accounts, you may be able to make modest improvements to your score fairly quickly. Be aware, though, that missed payments may show up in your credit file for seven years and prevent you from achieving excellent credit for a long time.
A credit score that’s temporarily depressed by having too many new credit inquiries on your account will resolve itself quickly. Just hold off on applying for new credit for about half a year.
Other credit issues are more difficult to mitigate and may take longer to resolve. If you have run up high balances on your credit cards — or are up to your credit limits — your credit utilization rate will suffer and negatively affect your score until you have enough money to pay down your bills. That’s one reason to use credit cards judiciously.
Bankruptcies, foreclosures and repossessions have a greater impact on your credit score than other negative remarks on your credit report. And while there are certainly some instances when filing for bankruptcy makes good financial sense, doing so will almost certainly knock your credit score into the poor credit range. Generally, it will take a year or more of good credit habits to work your way up to a good credit score and many more years to reach an excellent credit score.
How to improve your credit score
When it comes to building credit, knowledge is power. The first step in improving your credit score is to know what’s in your credit file. Download your free credit reports from all three major credit bureaus at annualcreditreport.com. For other ways to access your reports, read the Federal Trade Commission’s advice on obtaining your free credit reports.
You may find legitimate mistakes on your report that are dragging your score down. Disputing and resolving those incorrect negative items with the corresponding bureau can boost your score.
Next, look at the five primary factors that influence your score and address them one by one.
Here’s a quick recap on how you can improve your chances of earning a high credit score:
- Bring all of your credit accounts into good standing.
- Pay your balances down as much as possible to improve your credit utilization rate.
- Pay attention to your credit mix. Try to have both installment and revolving accounts.
- You can also boost your credit score by becoming an authorized user on a creditworthy person’s credit account.
- Apply for credit when you’re young to begin building a lengthy credit history.
- Apply for new credit only occasionally and when you truly need it. That way, you’ll avoid the dings on your report that result from new hard inquiries.
Fixing your credit is a time-consuming process. Those who don’t have the time or temperament to take on the task themselves may choose to hire a credit repair company. These companies charge a fee for disputing errors on your credit report on your behalf, but not all of them are reputable. Research any credit repair companies you are considering before committing to a service.
How long does it take to improve credit score FAQs
Can your credit score go up 50 points in a month?
While some companies promise that they can improve your score significantly in a short period, it's highly unlikely and perhaps even impossible to achieve so much improvement so quickly. It takes credit bureaus longer than a month to even register that you've adopted better credit behaviors. Unfortunately, it takes a very short time to establish bad credit and a long time to repair it.
How long does it take to rebuild your credit from 500?
According to Experian, a credit score below 579 is considered poor. If your score is that low, you need to change your habits for a considerable length of time before you see any major improvement in your credit score.
What is the average credit score in America?
Americans do a surprisingly good job of managing their debt and credit scores. The average FICO score in the U.S. rose to 714 in 2021. But while that score falls into the good range according to most credit bureaus, it won't earn you the best interest rates on a mortgage, credit card or student loan.
How long does it take to get a credit card with a bad credit score?
Having bad credit will certainly limit your credit card options. Negative remarks stay on your credit report for up to seven years. But there are a couple of strategies you can use to hasten the process of getting a new card, like applying for a secured credit card or secured bank loan.
Gas credit cards and store charges are also easier to get than general-purpose credit cards like VISA and Mastercard. You can apply for one of those and practice perfect credit behavior to begin building a positive credit history. You may be able to get a credit card even when you have poor credit by applying with a co-signer who has excellent credit.
Summary of our guide on the time to improve your credit score
It takes time to improve your credit score. How much time? That depends on the issues raised in your credit report. It can take a few months if your problem is simple. For example, if you have an account in arrears, getting it up to date may improve your credit score in as little as 30 days. However, it can take years to improve your credit standing if you’re recovering from bankruptcy or foreclosure.
Being credit savvy is a prerequisite for both establishing good credit and improving your credit score when it’s subpar. And you’ll save tens or even hundreds of thousands of dollars during your lifetime. By understanding the factors that influence your credit profile and practicing good credit habits from the get-go, you’ll never have to repair your credit.
