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How to Rebuild Bad Credit and How Long It Will Take

Bad credit is something that can happen to anyone. It may be financial difficulties, job loss, or other life circumstances that prevent you from paying your bills on time. Or it can be the result of errors in your credit report, which you’re not aware of.

No matter how you got there, bad credit can be a significant obstacle to getting the things you want in life, like a home or a car. It can also make it difficult to get a job or insurance.

But bad credit doesn’t have to be permanent. There are steps you can take to improve your credit score and get back on track, but it’s not a quick process. Here’s what you should know.

How Long Does It Take To Rebuild Credit?

Rebuilding credit can take a while, depending on your situation. For example, if you have many negative items on your credit report, it’ll likely take longer to rebuild your credit than if you have few or no negative marks.

And it depends on a few factors such as:

  • The type of errors are on your credit report
  • The age of negative information
  • The number of negative marks are present on your credit report 
  • Your credit score before it dropped

The rebuilding process can hinge on the severity of these factors. For example, if you have a few late payments a couple of years old, your credit score will likely recover much faster than if you have a bankruptcy or foreclosure.

For your information, here’s how long derogatory marks stay on your credit report.

  • Late payments can stay for seven years 
  • Charge-offs can stay for seven years
  • Settled accounts can stay for seven years
  • Closed accounts can stay for ten years
  • Foreclosure can stay for seven years
  • Hard inquiries can stay for two years

As you can see, some of these items will take quite a while to disappear from your credit report. That’s why it’s essential to start working on rebuilding your credit as soon as possible, even if you can find a lender for low credit score.

The Best Ways to Rebuild Credit

Rebuilding your credit takes time and effort, but it’s worth it. By following a few simple steps, you can start to improve your credit score and get on the path to financial stability. Here are some tips for rebuilding your credit.

Pay Your Bills On Time

It may seem like a no-brainer, but it’s one of the most important things you can do to improve your credit score. Payment history is the most significant factor in determining your credit score, so make sure you pay all of your bills on time, every time. Set up autopay if you have to make sure your bills are getting paid on time.

Even if you can only afford the minimum payment, make sure you pay on time and get caught up as soon as possible. One late payment can hurt your credit score, so it’s important to avoid late payments if at all possible. However, if you do end up being late, don’t panic – make sure you get back on track as soon as possible and keep making timely payments from that point forward.

Keep Your Balances Low

Another crucial factor in determining your credit score is how much of your available credit you’re using. And this is called your credit utilization ratio, and it should be below 30% for optimal results. If you have a credit limit of $1,000, you should keep your balance below $300. Or else you might see your credit score drop.

Apply For New Credit Cautiously

Additionally, try to limit the number of new lines of credit you open. Every time you open a new line of credit, it shows up on your credit report and can ding your score. So if you don’t need that new store credit card, resist the temptation to sign up for it.

Opening too many lines of credit can also make you look like a higher-risk borrower to lenders. So if you’re trying to get a loan with the best possible terms, it’s best to keep your number of lines of credit low.

Check Your Credit Report Regularly

Make sure you keep an eye on your credit report. You’re entitled to one free credit report from the major credit bureaus every year, so take advantage of that and check for any errors that could be dragging down your score. 

Final Thoughts

Rebuilding your credit doesn’t happen overnight. It’s not easy, but it’s possible. A few simple steps can get you on the right track, like paying your bill on time and keeping a low balance on your credit cards. The most important thing to remember when rebuilding your credit is to stay positive. You’ll make mistakes, but as long as you learn from them and keep moving forward, you’ll be fine.