Credit Myth #5: It Will Take You Seven Years To Improve a Bad Credit Score
It is not uncommon for consumers to give little to no thought to their credit score until it comes time to make a major purchase. If you want to buy a home or vehicle and just realized that your credit score is far from worthy, you may panic, thinking you’ll have to wait forever to take the next step of your adult life. The good news is the idea that it takes seven years to repair bad credit is just a myth.
The Longevity of Negative Information
It’s true that negative information can stay on your credit report for as many as seven years. Negative information includes things such as bankruptcy, late payments, delinquent accounts and closed accounts, just to name a few examples. However, if you take measures to counteract it and improve your credit score, the negative information becomes less and less relevant. With commitment and perseverance, individuals with scores as low as 300 to 400 can obtain a fair to good credit rating in as little as one year.
Counteracting Negative Information
If you’re serious about improving your credit, there are steps you can take to begin improving your credit today. If you follow them, you may see a boost in as little as 30 days:
• Review Your Credit Report: You won't know what you need to fix without first understanding the problem. Review your credit report to see why your score is so low in the first place. Do you have a history of late payments? Are your cards all maxed out? Are there errors you don’t know about?
• Pay Down Your Debts: Though you can’t erase missed or late payments, you can reduce your credit utilization rate (a major scoring factor) by paying down as much of your total balance as possible. Ideally, you should keep your debt-to-limit ratio at 30% or lower. If you need help, consider using a personal loan to consolidate your debt.
• Dispute Errors: By law, credit bureaus must investigate and respond to disputes within 30 to 45 days of receiving them. If you legitimately believe there is an error on your report, fight it. You may see a small point boost for doing so.
• Keep Credit Inquiries to a Minimum: When you submit a credit card application, the lender performs what is known as a "hard inquiry.” A hard inquiry can ding your score by five to ten points. If you’re serious about boosting your score, try to only apply for one or two new credit cards every 12 months.
Stay on Track
The most important thing you can do after you take that first step toward repairing your credit is to stick with it. It won’t help you to pay down your balances if you only rack them back up again. Continuing to miss payments or applying for more credit won't help either. If you’re serious about fixing your credit, commit to the long haul.