How Long Does It Take To Improve My Credit Score?
A low credit score can be the bane of any business owner. Without a solid credit score, your business may be unable to qualify for competitive loans or good credit cards, ultimately costing you money in the long term. Unfortunately, it isn’t always clear how long it will take for you to rebuild your score after something damaging has happened.
Thankfully, two of the largest companies that calculate credit scores (VantageScore and FICO) have discussed timeframes for credit score recovery. Because these companies offer slightly different ways to tabulate your credit score, their statements about the timeframe for recovery from a negative action are also different.
Want to know how long it may take your credit score to recover from various negative actions? Our guide below has you covered!
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Credit Score Recovery Timeframes
Determining how long your credit score will be negatively threatened by an action depends on the severity of the action. Based on information from VantageScore, a company that produces a credit score model, minimal negative actions will pose a 10% to 30% impact on your score, while moderate ones impact up to 50%. Major actions can affect up to 90% of your score.
Several actions cause minimal impacts to your credit score. These are—in order of most to least severe—maxing out a credit card, closing an account, and obtaining a new line of credit. According to VantageScore, any of these actions will take around three months to recover.
However, if you miss a payment or default on a loan, the impact to your credit score will be moderate. It will require roughly a year-and-a-half before you recover.
The worst action that can impact your credit is filing for bankruptcy. Doing so has a major negative impact on your score. It will take between seven and 10 years to fully recover.
FICO, another analytics company that calculates credit scores, offers slightly different information. Their recovery timeframes depend on the user’s starting credit score.
For instance, for someone starting with a credit score of 680, it will take nine months to recover from a missed mortgage payment. Someone else with a score of 720 may need around three years, while a person with a score of 780 will not recover that score for three to seven years.
For a short sale, deed-in-lieu, settlement, or foreclosure, those with a score of around 680 will take three years to recover. Those with higher scores will take around seven years.
When it comes to bankruptcy, a starting score of 680 will take approximately five years. Those with higher scores will take between seven and 10 years to recover.
Changing A Credit Score Quickly
While it usually takes a while for your credit score to change for the better, there are a few things you can do to improve it rapidly.
If you find yourself with a hefty credit card balance, paying it off can give your credit score a boost. Similarly, receiving a credit line increase can also improve your score. Both these actions directly impact your credit utilization—one of the key components of your credit score. Credit utilization, which is the ratio between the amount of credit you’re using and the amount you have available, makes up 30% of your overall credit score so freeing up space can give your credit a much-needed shot in the arm.
Additionally, if you notice an error on your credit report history, it may be worth disputing it. Should you win your dispute, you could receive a quick bump to your credit score. Of course, the entire dispute process might take well over a month before everything is all said and done. If you want to find out more about disputing a credit report, check out the Merchant Maverick guide.
Monitoring Credit Scores
When you’re working on improving your credit score, knowing how to monitor changes is crucial. Luckily, there are several websites that make it both easy and free to do so.
Some of the best names in the business include Credit Karma, Discover Credit Scorecard, and WalletHub. Each of these sites will provide you with a basic credit score. However, because each site pulls its information and calculation models from different sources, you may find it’s best to check your scores across multiple sites.
You’re also able to request a free credit history report from each of the three major credit bureaus every year. While these reports won’t give you a simple credit score, they will show your complete credit history. This can be helpful in spotting errors, and you can also better understand what potential creditors might be looking at in the future.
To find out more about credit score tracking, visit our article on the best credit score websites.
For the most part, improving your credit score is about patience. You may not be able to turn it around overnight, but through smart planning and diligent credit use, you’ll be well on the road to increasing your score. Once your score rises, you’ll be able to apply for better credit cards and lower-interest rate loans, letting your business build at a faster pace.
If you’re looking at a less-than-stellar credit score, check out this guide to improving personal credit. For those wanting to use a credit card to boost their credit, we’ve got a guide for that, too.