Bad credit can be the result of poor financial choices or life changes, such as a divorce or illness, that prevent you from meeting your money obligations. Bad credit may also result from credit report errors. There are several things you can do to rebuild bad credit, but it's not necessarily a speedy process. If your credit score isn't quite where you'd like it to be, it's helpful to understand the kind of time frame involved in improving your credit rating.
Rebuilding Bad Credit: How Long Will It Take?
Bad credit is defined as a credit history that includes negative remarks, such as late payments or charge-off accounts, which are damaging to your credit score. According to myFICO, a poor or bad FICO credit score is one that falls between 300 and 579, out of a possible 850.
There is no standard time frame for how long it can take to repair past credit mistakes and increase your score into the “good credit” range, which means a FICO score of 670 or better.
It can depend on a number of factors, including:
- The type of negative information on your credit report
- How many negative or derogatory marks are on your credit report
- The age of negative information
- Where your credit rating was before your score dropped
Your credit rebuilding process may hinge on the severity of the negative history dragging down your score. For example, a charge-off, foreclosure, bankruptcy, or court judgment may be more difficult to recover from than one late payment.
If you notice incorrect information on your credit report, start the process of correcting errors with creditors and credit reporting agencies, which could help your bad credit improve.
Here’s how long negative information stays on your credit report.
- Each late payment: Up to 7 years
- Charge-off: Up to 7 years
- Bills sent to collection agencies: Up to 7 years
- Settled accounts: Up to 7 years
- Closed accounts: Up to 10 years
- Foreclosure: Up to 7 Years
- Chapter 7 bankruptcy filings: Up to 10 Years
- Hard inquiries for new credit: Up to 2 years
Removal is based on the reporting of the first late or missed payment. Check your credit report to determine a negative item’s future removal date from your credit history. The credit bureau reporting negative information will specify the month and year it will be removed.
If your bad-credit event happened recently, it won’t be removed for up to seven years, so you’ll most likely have to wait to see your score improve. But if the bad-credit event happened years ago, you may be closer to a score increase than you realize.
In theory, someone with an excellent FICO credit score of 800 or better may experience a longer wait time to get back to excellent credit if their score dipped into the poor credit range. On the other hand, if you had a fair credit score (a score ranging from 580 to 669) before it dipped, it may not take as long to move back up from the bad credit to fair credit range again.
Barriers To Rebuilding Bad Credit
There are five factors that can positively or negatively affect your credit score. Each one makes up a percentage of your FICO score.
- Payment history (35%): Pay the full amount of bills on time
- Amounts owed (30%): Lower balances and less utilization
- Length of credit history (15%): Don’t close old accounts and use current ones
- Inquiries for new credit (10%): Avoid applying for new credit unless necessary
- Credit mix (10%): Use different types of credit like credit cards, loans, and more
By acting responsibly in these five areas, you can establish a good credit history again after a credit blip.
While your creditors are not required to report your account activity to the credit bureaus, they often do so because it’s in their best interest. They may do this once a month or every other month—whatever works for their schedule.
But one month of positive activity, such as lowering a debt balance, may not cancel out several months of missed payments or something more serious, like bankruptcy. Prove creditworthiness with a track record of wise credit use. Several months may pass before you begin to see any significant difference in your credit scores.
Using a Credit Card To Rebuild Bad Credit
Responsible credit card use can be part of your credit recovery. Credit card use allows you to build a positive revolving credit history when paid on time. As long as you keep the balance on the card low or pay in full each month, then you’ll also promote a healthy credit usage ratio, giving your score another boost.
Consider these three options:
- If you are still using one or multiple credit cards, work on paying down your existing balances to maintain a low credit utilization. And, of course, pay on time each month. You may consider consolidating or transferring your balance to a balance transfer credit card, which often comes with a low-interest rate, so you can pay down the balance faster than before.
- Become an authorized user on someone else's credit card, which provides charging privileges without making you directly responsible for the debt. The primary cardholder's credit history for that card will show up on your credit report. If they have a track record of using the card responsibly, it may give your credit score a boost.
- When you have bad credit, your card options may be limited to secured cards. These cards require a cash deposit to open your account, which doubles as your credit limit. A secured credit card can be used the same as any other credit card. Some cards allow you to convert your account to an unsecured card and refund your deposit once you've shown that you can use the card responsibly. Ensure that any secured card you apply for does report account activity to the credit bureaus.
The best balance transfer credit card promotional offers (with the most favorable interest rates and terms) are typically reserved for people with good to excellent credit.
Other Ways To Rebuild Bad Credit
While a credit card can be a helpful way to turn around a bad credit rating, there are other methods you can try that may help raise your score. Remember to weigh all of your options for rebuilding bad credit, including:
- A credit builder loan from your bank or a credit union
- A co-signer to help you get a small personal loan. (Use the calculator below to figure out how much you'll pay for a personal loan.)
- A retail store credit card, which may be easier to qualify for with a lower credit score
Most importantly, remember to be patient and give your efforts time to rebuild bad credit and show results.