Around 36% of Americans have felt ‘serious stress’ throughout 2020. We all have our unique mix of stresses, and a damaged credit score only adds more fuel to that fire.
How can you move forward in life when your credit is so damaged that it affects every other facet of your financial life?
We’re going to talk through the process of repairing credit by answering one question: “How long does it take to repair credit?” Let’s begin!
Your Credit Score Isn’t a Static Thing
What most people don’t know is that your credit score isn’t a static number, but a dynamic one that changes from week to week and month to month depending on your financial actions.
For example, you might have a late payment one month on one of your credit cards, and that could impact your credit score negatively when the credit card company reports that late payment.
But after that, you had a conversation with your credit card company, asking them to retract the late payment, based on your history of paying on time. They agreed, removing that negative late payment hit, and your credit score jumped up again.
And so on. Your credit score is constantly ticking up or down every week and month, depending on what you are doing with your daily life.
That’s why it’s so important to keep tabs on your credit score by getting credit reports sent to you every month. This way you will know instantly when your credit score has fluctuated, and you can start fixing it right away.
It’s much worse when you find out 2 years later that you missed one payment (unintentionally), and that caused your credit score to dip. And much harder to do anything about it as well.
Repairing Your Credit Score Depends on Your Starting Point
Also, another factor to consider when trying to repair your credit score is that everyone has a different starting point. Some people are starting from a point where they have made only a few mistakes, so they can repair their credit in a few weeks or months.
Whereas others are starting from a point where they have completely devastated their credit history by declaring Chapter 7 bankruptcy, and it will take them at least a decade to recover completely from that (it takes that long for a Chapter 7 bankruptcy to be purged from your credit history).
That’s why there are no one-size-fits-all strategies when repairing credit. If you are going to hire a credit repair company to help you out, they are going to tell you the same.
Don’t Wait Too Long to Repair Your Credit
If you are in a dire situation, you might start ignoring your financial situation because even thinking about your credit score makes you want to run away. But the ostrich-in-the-sand technique will not work here, since the faster you start repairing your credit, the better off you will be.
Despite the misconceptions perpetuated in the media, credit card companies and financial institutions are actually quite open to the idea of helping you repair your credit. But you have to take the first step here.
They will not reach out to you, except to ask you to pay your bills on time. But you can reach out to them to come up with a deal to either pay off your credit card slower or to get a lower interest rate.
Offer various options to them and see what they prefer. The thing is that financial institutions wish to receive their money quickly as well. And they don’t like the idea of waiting around until you declare bankruptcy and losing out on their entire payment.
So if you reach out to them and start coming up with creative ways to improve your finances, they will definitely wish to help you.
Don’t wait until your credit is completely ruined to do this though. Start right away as soon as you realize that your credit score needs some help.
The Factors That Can Help You Improve Your Credit Scores
Paying your bills on time and maintaining low balances on your credit cards (and loans) accounts for 65% of your total credit score.
This shows you how ‘easy’ it is to improve your credit score if you desire to do so. All you need to do is pay all your bills on time and ensure that you aren’t maxed out on your credit cards and loans.
Of course, it might be easier said than done.
That’s why having a conversation with your financial institutions and asking them to either lower your interest rate or give you more time to pay back your loans is such an important step in repairing your credit.
Other factors that can help you improve your credit score are listed below.
Length of Time You Hold Credit
The longer you hold a credit card or other loans, the more positively it affects your credit score. This also means that you need to pay those credit card or loan payments on time each month.
If you are struggling to improve your credit score, perhaps getting a new credit card and paying it off on time each month could be a good strategy. Remember, of course, that you don’t want to max out this new credit card, since that will hurt your credit score.
Building credit history as a newbie? If you have never held a credit card before, then the step above is a great way to build your new credit history and your score.
Your Current Credit Score
Interestingly, if you are starting with a high credit score, and then you go through a dip due to a financial mistake like missing payments or a foreclosure, then it will take longer for your credit score to bounce back.
It’s easier for a person with a low credit history to improve their score than a person who has a high credit score and has suddenly started making lots of mistakes, causing their score to dip.
That’s why, if possible, you should always try to avoid skipping or missing payments and always, always, always, try to keep your debt ratio low. The lower your debt ratio, the easier it will be to get a loan and a mortgage. And vice versa.
Not All Negative Impacts Are Scored Equally
Also, remember that not all financial mistakes have similar impacts on your credit score. For example, paying your bills 30 days late is bad, but not as bad as paying them 90 days late or not at all.
As you might imagine, declaring a foreclosure or bankruptcy has the largest negative impact on your credit score.
How Long Does Credit Repair Take After Dipping?
Let’s look at some specific numbers here. These are all estimates below.
When it comes to 30-day late payments, it takes 9 months to improve your credit score if you are starting at a score of 680, 2.5 years if you are starting at 720, and 3 years if you are starting at 780.
As iterated earlier, it takes longer for folks with higher credit scores who have had a dip to improve their scores.
When it comes to a 90-day late payment, it takes 9 months to improve your credit score starting at 680, 3 years if starting at 720, and 7 years if starting at 780!
Finally, for a foreclosure, it takes 5 years for a person to improve their score if starting at 680, and 7-10 years if you have a score higher than 720. Wow!
You are slapped on the wrist if you are doing well financially and then you make a sudden mistake. That’s why it’s important to keep on top of your finances. And if you see that your credit report is looking wonky in some way, then get help in fixing it from a credit repair agency.
Some Other Ways to Improve Your Credit Score
Don’t lose hope if your credit score has dipped. There are certain measures you can take to start improving your credit score fast!
Pay Down Your Credit Card Balances
This is a trick that lots of folks with low credit scores use. Of course, credit card companies are savvy to these tricks now, but you can still do it in a non-underhanded fashion.
If you are maxed out on one credit card, you could borrow from friends or family and pay it down so that your debt ratio lowers, and that will boost your credit score.
Some people will also move credit around, so that if they have some room on one credit card, they might move some of their balance from one card to another, to make it seem as if their debt ratio is decreasing.
It’s alright to use the trick above once or twice, but don’t overdo it. Try to pay down your credit balances, rather than playing the Russian roulette game of moving your credit around. It will get tiring after a while, and credit card companies will catch on soon enough, which could further damage your score.
Do Not Close Out Credit Card Accounts
One mistake a lot of people make when trying to improve their credit score is that they start closing out credit cards that they have paid off or don’t use anymore. That would be a mistake because any older credit accounts you have are actually helping you boost your credit score.
This is because the longer you have a credit account, the better your credit score. That’s why people who are new to building credit history start off with a lower score: the companies are still uncertain about their financial habits.
If you are not using a credit card anymore, that’s great. Don’t close out the account, but cut up the credit card, or ask the credit card company to put a freeze on the account. This way the account still remains open on your credit history, and it allows your credit score to keep going strong.
Ask for a Credit Limit Increase
If you have the courage, you could even speak to your credit card companies and ask them to increase your credit limit. Maybe you could use your previous history of paying all bills on time as a way to reassure them that you are just going through a temporary rough patch.
When your credit limit increases, your debt ratio goes down, since you aren’t maxed out on your credit limit. This gives a positive boost to your credit score.
There is one thing to be cautious of here. Control your impulsive spending and don’t use up the extra credit limit right away by buying some useless items.
This will just plunge you deeper into debt and cause your credit score to dip even lower.
Dispute Any Errors Right Away
Do not wait for credit card companies to realize their mistakes on their own. Call them and dispute errors right away. The faster you can get mistakes purged off your credit report, the more likely it is that your credit score won’t be affected by them.
Credit card companies are quite sympathetic to people who are going through a rough time and need some additional help. They have heard it all, so don’t be shy, and tell them what your financial situation is. They might be able to come up with a better solution to help you out than what you would have thought of.
They are experts in getting people to pay off their debt on time, so use them to your advantage.
This is another reason why it’s so important for you to check your credit score monthly. Stay on top of any changes that occur in your credit history. This way you will also be able to catch any instances of identity theft that could affect your credit score.
Use a Credit Score Simulator
This is a useful but underutilized tool that you can use to figure out what happens to your credit score in different cases. You can check what would happen if you made a late payment or paid off all your credit cards.
In this manner, you can figure out what steps would be ideal in ensuring your credit score keeps going up and up.
Credit Disputing Process
If you have never disputed an error on your credit history, then you will want to read this section with care. It will give you an idea of how to formally dispute errors on your account, so you can boost your credit score as quickly as possible.
Remember that your credit score is the number that every financial institution looks at when figuring out whether to lend you money or not, be it a mortgage, car loan, or another credit card. It is a very important number, even though most people ignore it and don’t even know what their credit score is.
Here’s how you will want to dispute an error on your account in detail.
You will start by downloading your credit reports every week if possible, or at least every month. There are many free credit report companies out there, so pick one and ask them to send you your credit report weekly by email.
Once you have your credit report, go through it meticulously. If you lack attention to detail, then ask your spouse or friend who’s better at this to help you. Comb through every item on your report and see if there’s anything that’s a false charge or a mistake.
If you find an error, then it’s time for you to take some action. Start drafting dispute letters and gather evidence.
You could start by contacting vendors or shops where you reputedly purchased the items. Or you could contact the credit card company to ask them about the false charge or error.
Sometimes a formal dispute letter is necessary to make changes to your credit report. Other times, if the error is still fresh, you can just contact the credit card company or financial institution to get the error removed from your report.
Once you have sent in the dispute letter and relevant documentation, you can sit back and wait for the results. It usually takes about 30 days for each dispute to be resolved. So if you have many of them, you will want to be patient.
Credit Repair After Bankruptcy Is More Complicated
As you might imagine, repairing your credit after you declare bankruptcy (Chapter 13 or Chapter 7) is a bit more complicated than the process outlined above.
Remember that Chapter 7 bankruptcy remains on your record for 10 years, whereas Chapter 13 only remains on your records for 7 years. Make sure you know when your clock started ticking, so you know exactly when it should be purged from your credit history. You don’t want this penalty to stay longer on your records than necessary.
Once your bankruptcy is complete, every account included in your filing should say ‘discharged’ or ‘included in bankruptcy.’ They shouldn’t say anything else like ‘active,’ ‘delinquent,’ ‘charged-off,’ or ‘current.’ It’s important for you to check your credit report to make sure the accounts are correctly marked.
All the balances on the accounts included in your bankruptcy filing should also be at zero. If there is a balance showing, that’s an error and should be rectified right away.
If you have any accounts like a car loan, mortgage, and/or student loan that you kept through the bankruptcy, make sure you pay these off on time, as they can help you boost your credit score.
Hire a Credit Repair Company
Is your head reeling from all the work it’s going to take to dispute errors and get your credit score repaired? It is a lot of work, but remember that Rome wasn’t built in a day. And your credit score will not be fixed in a day either.
If you are too busy to do all this work on your own or if you are having a hard time wrapping your head around all the steps, then you should contact a credit repair company and get their help.
The great advantage of hiring a credit repair agent is that they are highly experienced and knowledgeable about myriad credit repair practices. They might be able to come up with tactics that you would never have thought of on your own.
They will also notice errors faster than you might and will be able to get them resolved with very little intervention from you. All you need to do is have a brief 30-minute consultation session with them, where you authorize the company to pull credit reports and make disputes on your behalf.
Voila! That’s all you need to do.
Once the credit repair company has your authorization, they will go ahead and start the credit repair process.
As they work through the various steps and find errors to dispute, they might contact you here and there if they have questions or if they need additional documentation. But it can all be done on the phone, which means you can relax knowing that your credit score reparation is on its way.
When each dispute gets resolved and your credit score gets a boost, they will inform you of the progress, so you don’t have to wonder about what’s going on.
How Long Does It Take To Repair Credit? – It Depends
Now you know the answer to “How long does it take to repair credit?” The answer isn’t as cut and dry as you might expect or wish. Every person’s financial situation is going to be quite unique, and that will dictate how long it takes them to repair their credit. If you are still unsure of the steps and looking for some additional help, then contact Inside Credit Repair today! Check out our 60-day credit repair service.