A bad credit score can diminish your ability to secure better loan terms, rent a long-term home, and even find certain types of jobs. This makes it essential that you get your credit score out of the “bad” range in order to get this negative label off of yourself.
But exactly how long does it take to improve a bad credit score? To help you answer this question, here’s a quick guide to correcting undesirable credit scores and improving your financial standing.
Begin by Understanding What Does a Bad Credit Score Mean
Before you can learn about tips to get a home loan with bad credit or suggestions to secure a credit card with a low credit score, you need to understand what a bad credit score actually looks like. Depending upon the credit scoring model, your credit score may range from 300-850. Anything from 300-579 is usually considered “poor,” while the range from 580-669 falls under the “fair” range. To secure the benefits of higher credit scores, you need your score to go above 670, 740, and 800 to land in the “good,” “very good,” and “excellent” ranges, respectively.
How Much Time Does It Take to Improve Your Credit Score Range?
Whether you are applying mortgage or looking for a car loan, it’s crucial that you have a high credit score. But the time it takes for you to reach the higher ranges depends upon where exactly your current score stands and why it was impacted in the first place. For example, if your credit score was affected due to late payments, you may only need to make future payments on time to slowly but surely improve it within 12-18 months. In contrast, if you filed for bankruptcy, it can stay on your credit report for 7-10 years.
This means that the time it takes to improve your credit score varies from person to person. If your current credit score is in the fair range with no outstanding collections, you may improve it to a high enough range within a year or so. But if you have long-standing items on your credit history, you may need to wait for a couple years to see remarkable improvements. You can think of it as being similar to using a high-yield savings account to slowly build your wealth.
What Can You Do to Improve Your Credit Score?
While the period to improve your credit score varies from case to case, the actions you can take to enhance your credit score largely stay the same. This includes the following practices.
Make Payments on Time
Look at any financial guide to living a wealthier life, and you may find that making timely payments is the easiest way to improve your credit score. This includes your loan and credit card payments alike.
Settle Payments in Collections
If you have any outstanding payments that are sent to collections, make it a point to clear them. In case you need help, you can use tools like a personalized budgeting journal.
File Disputes For Incorrect Reporting
There are times when you make payments that are not reported to credit bureaus. This makes it essential that you check your credit credit report and file disputes to get these errors removed from it.
Lower Your Credit Utilization Ratio
Your credit utilization ratio across all revolving credit products like credit cards should be under 30% of the approved limit. You can learn how to live below your means to ensure you don’t go overboard with your credit cards.
Get a Secured Credit Card
If your credit score is too low, you can look into specialized solutions like a secured credit card. You can get this card for improving your credit score over time in return for an upfront deposit. You can then get the deposit back once you improve your score.
Speak to a Professional
Even when you know the basics of improving your credit score, the process can get a bit overwhelming. By turning to services like a financial planning platform, you can get expert guidance on how to improve your credit score.
This information can help you understand the principles of getting a good credit score and empower you to improve your financial situation. This paves the way to building a better life for yourself and your loved ones.