Rebuilding your credit might not be the easiest thing to do — but it’s worth it. Poor credit signals to lenders and credit card issuers you won’t be able to make on-time payments. That means you might face higher interest rates on mortgages and credit cards, and it can even hurt your chances of renting an apartment.
Luckily, improving your credit is possible. By setting goals and making a plan, you can rebuild your credit and open a world of opportunities you wouldn’t have had before, like lower interest rates on credit cards and loans. With a higher credit score, you can show lenders and credit card issuers you’ll be able to make on-time payments in the future.
It’s just three digits, but this all-important number represents how likely it is you’ll pay your bills on time.
There are different kinds of credit scores, but we’ll focus on your FICO® credit score. Here’s what it’s made of.
How long all your credit accounts have been open.
Your combination of loans, credit card accounts, retail accounts, and accounts with financial institutions.
Payment history of both revolving credit, like credit cards, and installment credit, like a car loan or a mortgage.
The total amount of debt you owe.
How many credit inquiries you’ve made in a certain amount of time. For example, lenders might think you're in financial trouble if you apply for several credit cards within a few weeks.
Before we get into the steps to rebuild your credit, let’s take a look at a few reasons why your credit score might be negatively impacted.
Late or missed payments can last on file for seven years, but they do eventually fall off your credit report.
While there’s no specific timeframe in which you can expect your credit score to grow, you can start doing things right now to improve your score. Follow the steps above, and your credit will improve as soon as you build up enough positive credit history to outweigh any negative marks.
To rebuild your credit fast, start by reviewing your credit report and disputing any errors you find. You can also pay your cards more than once a month to help reduce your balance more rapidly. Every positive mark on your credit report helps raise your credit score.
It depends on your specific credit history and what issues you need to repair on your credit report. While late payments stay on your credit report for up to seven years, correcting errors on your credit report could positively impact your score within a few months.
It’ll take some work, but it’s possible.
Good news if your credit score is low: Making small changes can result in a noticeable boost. Here’s what to do.