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How Long Does It Take to Rebuild Credit?

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Struggling with poor or bad credit and wondering how long does it take to rebuild credit? Read on.

Good credit is a lot like trust — it takes years to build but can fall apart in minutes.

But, having a bad or poor credit ranking doesn’t have to be forever. If you are willing to work hard to improve your credit, then you are already on the right track. Many people wonder how long it takes to rebuild a low credit score, and the true answer is “it varies.” That’s okay because we’re here to help provide some guidelines.What Impacts Your Credit History?

What Impacts Your Credit History?

There are many different factors in determining your credit worthiness (i.e. how risky it is to give you a loan). When a lender decides if they want to approve your credit application, lenders are especially interested in:

  • Whether or not you’ve made past payments on time.
  • How much you paid off each time — do you make minimum payments, pay the entire amount or pay some amount in between?
  • Your number of open lines of credit — credit cards, mortgages, student loans, etc.
  • Your Credit Utilization Ratio (your amount borrowed over your available credit) — for example, if you have $10,000 in available credit and you have an ongoing balance of $5,000, then you’re using 50% of your credit! Limit yourself to utilizing no more than 30% of your available credit each month to rebuild your credit.

Find The Problems

If you have a low credit ranking, don’t despair — there might be a couple areas you can improve. One way to pinpoint an area where you’re struggling is to request a free copy of your credit report and look for red flags that could use improvement. For instance, if you have several lines of credit open, consider focusing on paying off your cards with the highest interest rates. This can lower your credit utilization ratio, which will help to improve your credit score.

Meanwhile, continue making minimum payments on your other cards that have lower interest in order to build up a history of on-time payments, which plays a major role in determining your credit score.

So, How Long Will it Take?

If you have a low credit ranking, it might take several months to a year before you’re back in “fair” or “good” territory. The pace of rebuilding your credit depends on how much you’re willing to sacrifice to achieve better credit. This may mean embracing more frugal habits to pay down debt faster, make on-time payments, and avoiding using credit cards when possible.

While there’s no magic number of months to improve your credit score, credit agencies generally refresh scores every 30 days. This means making smart changes now, could put your credit score on an upward trajectory as soon as next month. Try reading 8 Tried and True Ways to Improve Your Credit Score, for tips and tricks to get your score up even faster.