Your credit score is an important indicator of your overall credit health, and improving it can open up new opportunities and savings. If you want to improve your score, the process can take time, but it’s possible. Everyone’s credit history is unique so there is no sure-fire way to guarantee a specific increase in your credit score over any duration of time. And if anyone tells you otherwise, you should proceed with caution. However, you can work to improve your credit score by addressing the issues that are harming your score and by developing good credit habits going forward, such as paying bills on time.
How Long Does It Take to Improve Your Credit Score?
There’s no set amount of time for how long it will take to improve your credit score by a certain number of points. There are several factors that go into calculating your credit score—some more influential than others. What you can do to improve these factors will depend on what’s in your unique credit history. Improving your score is a feat that will take time and require patience and discipline. The sooner you start the process, though, the earlier you’ll achieve your goal.
If your credit score is low, there are a couple major factors that may influence how long it takes to build your score:
- You’re new to credit. When you’re just starting out building credit, it’ll take at least six months of using credit to meet the criteria to receive a FICO Score as long as you start out on a positive note, developing good credit habits will help you build your credit history and score in the coming months and years.
- You have negative information on your reports. If you’ve experienced bankruptcy, foreclosure, repossession or another significant negative credit event, it can take more work to improve your credit score. Establishing positive credit relationships going forward can eventually outweigh the negative, but those items will remain on your credit reports for up to seven or more years, so it may take more time.
What Factors Affect Your Credit Score?
There are five major factors that affect your FICO Score. And even though some have more influence on your score than others, it’s important to take a holistic approach in your efforts to build credit.
- Payment history: On-time payments are crucial to building and maintaining good credit. If you have late payments on your credit reports, get caught up as soon as possible. Also, make it a goal to pay your bills on time and in full every month. If you worry you’ll miss a payment, contact your creditor as soon as possible to understand your options, and to talk about possible accommodations so your credit isn’t affected.
- Amounts owed: The total amount you owe in debt is important, and shows lenders that you’ve made progress on your existing accounts. This factor also focuses on your credit utilization rate, which measures the percentage of your available credit on credit cards that you’re using. The lower your balance is relative to your credit limit, the better your utilization rate will be for your credit score.
- Length of credit history: The longer you’ve been using credit, the more data lenders have to ascertain how well you manage your credit accounts. Your FICO Score calculation also includes the average age of your accounts, so frequently opening new accounts can have a negative impact on your score.
- New credit: Virtually every time you apply for credit, the lender will run a credit check to gauge your creditworthiness. This will result in a hard inquiry on your credit report, which can knock a few points off your score temporarily. If you apply for multiple accounts in a short period—except for in situations where you’re shopping around for a loan—it can have a compounding negative impact on your score.
- Credit mix: In general, being able to manage multiple types of credit, such as credit cards, auto loans, mortgages and student loans, can have a positive impact on your credit score. However, it’s not wise to open several new credit accounts solely to improve your credit mix. Diversifying your credit mix often occurs naturally over time.
How to Improve Your Credit Score
The steps required to improve credit can vary from person to person. While some may apply to you, others may not. However, here are some general guidelines that can help you increase your credit score:
- Pay all bills on time, this is 35% of your credit score.
- Get caught up on past-due payments, including charge-offs and collection accounts.
- Pay down credit card balances and keep them low relative to their credit limits, this has a 30% impact on your credit score.
- Apply for credit only when necessary.
- Avoid closing older, unused credit cards.
- Review your credit reports for inaccuracies and dispute them with the credit bureaus.
- Ask a family member with good credit to add you as an authorized user on their credit card account.
Again, it’s difficult to determine exactly how much your credit score will improve with each of these steps, but as you develop these good credit habits, you’ll see positive results over time. Also, plan to monitor your credit score regularly to understand how your actions impact your score and to spot potential issues that could threaten your progress. We can help you with payment history, length of open accounts, and also debt ratio, this can all be done adding a trade line to your credit report. Come on in for a free consultation with one of our financial credit counselors, talk to you soon and be safe!
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