It’s common knowledge that a strong credit history and score makes life a bit easier, at least on the financial side of the line. New creditors are far more likely to give you access to the credit you need, when you need it, when you have a solid track record of making on-time payments, using other credit responsibly, and keeping negative marks like collections accounts to a minimum. However, there are times when life throws a financial curveball, and bad credit can be the unfortunate result.
The great news is there are several strategies for repairing less than perfect credit; the not so great news is that it takes time.
Understanding Bad Credit Issues
One of the most confusing issues surrounding repairing bad credit is the amount of time each negative item stays on a credit report. Each type of negative mark has a different timeframe, so let’s take a closer look at the most common bad credit entries.
- Late payments – a late payment entry from a creditor can stay on your credit report for up to seven years from when the incident took place.
- Charge-offs – any account that was not paid as agreed may be considered a charge-off by the creditor. This entry can also stay on your credit report for seven years, from the date it was charged off.
- Foreclosures – both foreclosures and short sales stay on a credit report for seven years.
- Hard inquiries – a hard inquiry takes place when a creditor checks your credit score and report. These stick around for two years in most cases.
- Collection accounts – any account that has found its way to a collection agency may stay on your credit report for up to seven years, plus 180 days from the date of the incident that prompted the move to collection status.
- Bankruptcies – all bankruptcies may legally stay on a credit report for up to 10 years, but most Chapter 13 bankruptcies that are discharged are removed after seven years.
While these time-frames for negative credit marks seem long, you do not have to wait for entries to fall off your credit report before starting the process of rebuilding.
The Timeline for Repairing Bad Credit
Every individual’s credit report is different from the next, so it can be a challenge to predict exactly how long it will take to repair bad credit history. However, making small steps in the right direction can help immensely, even when significant negative marks are present on your credit report. First, take the time to pull your credit reports from the major credit reporting agencies (Equifax, Experian, and TransUnion).
These detailed reports give you all the information you need to start the process of repairing credit issues. Start by looking for errors – any accounts that have incorrect balances or late payment errors, public records that are not accurate, and inquiries that are not accurate. Follow the dispute process with each credit bureau to get these removed from your report, and you will see your credit score rise once resolved. This is the most immediate way to boost your credit score.
Once you’ve disputed errors, the next step is to implement strong financial habits. If you have a current credit card or loan, be sure to make on-time payments each month. When that is a struggle, consider setting up automatic payments so you don’t have to worry about missing a due date. If you have yet to get new credit because of issues in the past, you have options such as secured credit cards and credit builder loans. So long as payments are made on time, you will see your credit score improve over several months of consistent payments.
You may also think about the other issues that impact your credit score over the long haul. Utilization of current credit accounts, such as lines of credit or credit cards, can drag your credit score down if you aren’t careful. MyFICO suggests having no more than 30% of available credit in use at any time. Devise a plan to pay down credit card balances to this level, or consider your options for a consolidation loan to help free up credit lines over time. This will also improve your credit score over the course of a few months.
If these are not viable options for you, there are companies ready and willing to help you get through the credit repair process. The best credit repair companies use several strategies to help improve your credit directly with your creditors. While this takes most of the pressure off your shoulders, it is important to note that credit repair is also not a quick fix. It can take several months to a few years to get your credit back to where it needs to be.
Final Thoughts on Repairing Bad Credit
Repairing bad credit is not an overnight process, nor is it something that takes place on its own. The best things you can do to expedite your timeframe for repairing credit blunders are to remove inaccurate information from your credit report, followed by sticking to sound financial habits and credit use over time.
