How Long Does it Take to Build Credit Back?

If you have a poor FICO credit score, you could be in a bind that will affect every financial decision you make. You may be searching all over the Internet to try to figure out how long you will be in this situation, but here are a few ways you can determine how long it may take for you to recover your credit score.

First, you should know the causes of your poor credit in the first place. One of the principal reasons that credit scores suffer in the first place is because of an accumulation of debt from not paying bills on time. Credit history accounts for thirty five percent of your credit score, so paying your bills on time is extremely important. By not paying your bills on time, you show that you are a bit of a risk. If you have many missed or late payments, you could be seen as a big risk.

Other credit mistakes often include filing for bankruptcy, foreclosing a house, and defaulting on a loan. Filing for bankruptcy should only ever be done as a last resort as it has the greatest impact on your credit score, especially since it counts as part of the thirty five percent of credit history. Like not being able to pay your debts on time, foreclosure shows credit companies that you are a high risk. If you can’t pay for your mortgage, there are likely many things you can’t pay for.

While some of these credit problems happen simply because of circumstance, they all still impact your credit score, but some have longer impacts than others. The length of your credit accounts impact  the percentages of components that make up your credit score.

Build Credit BackPayment history makes up thirty five percent of the score, followed by amounts owed, which makes up thirty percent, then the length of credit history follows that with a fifteen percent, then new credit and types of credit used are tied for last, but not least, at ten percent.

Credit history is the longest-lasting negative effect on your credit score. You won’t be able to change your credit history quickly. This is something to correct long term. The effects of a bad credit history will last for years, especially issues such as foreclosures and bankruptcies.  After that, having a poor utilization rate is the second longest-lasting problem for your credit score.

Recent activity does not have a long-lasting negative effect, though, and can help mitigate some of the damages of your credit history. However, some financial institutions will notice your recent activity and be wary if you try to open multiple trade lines in a short time span in order to help build your credit back up. Therefore, when opening new trade lines and doing new things to help improve your credit, be sure to balance and not go overboard when trying to help fix the old by bringing in the new.

Even if you have a low score, this doesn’t mean that your credit score is a lost cause. In fact, there are some steps that you can take that will help in as little as a few weeks or in as long as a few years.

One of the first things that you can do that will start taking effect over the course of a few months is to start a debt payment plan to reduce the amount of debt that you have. This shows as recent activity that does not necessarily involve opening new trade lines and has just as positive of an effect as opening a new trade line with the added bonus of helping you get closer to a debt-free lifestyle.

Something that you should not do is close your accounts even if you are not using them because the age of your credit accounts is one of the factors that will help raise your score. The older, the better. This may take years to help improve your score, but if you keep your old accounts open and mitigate the amount of debt that is associated with each account, then over the course of years, having positive accounts will help improve your scores.

To balance some of the negative accounts from your past and to help strengthen the ten percent of your FICO score that comes from types of credit used, you can always open new, positive accounts to offset the negative. It would be especially helpful if some of these accounts were varied types of trade lines. Balance the number of revolving and installment accounts that you have in order to maximize the types of credit that you have and strengthen the other ten percent of your score.

Yet another fast, easy way to build your credit back up is to dispute your credit score if you believe that it does not actually reflect your financial history. You can improve your credit score in a matter of just a few days to a few weeks, and all you have to do is digitally contact the three major credit bureaus and send proof that your credit score is inaccurate. They will adjust your credit score accordingly. The stigma around checking your credit score and the fear of talking to anyone from the credit bureaus should not prevent you from achieving your financial goals. This can be one of the easier and fastest ways to add points back to your score, as long as you have errors on your report.

Whether the steps you take to improve your credit score take a few days or a few months to fully take root, they are steps that you should take in order to seize your true financial future. Especially since some of these steps can take mere weeks, there is no reason that you can’t start improving your credit score as soon as this upcoming week. Your financial future will start looking bright again after all, especially after taking even just one of these steps.