How Long Does It Take to Repair Your Credit?

how-long-to-repair-credit-score

If your credit needs repair, there are some simple and straightforward things that you can do to improve your situation. But first, you need to understand how you got into this position so that you can avoid landing there again.

Often, it’s the overuse of credit cards that gets people into trouble. While in college, you may have been enticed with special interest rates or rewards for responsible behavior. This sometimes leads to opening too many accounts or maxing out credit limits that negatively affects your credit score.

Why is a good credit score important?

A good credit score is an indicator of your financial health and can be the first step to saving money on your student loans, getting a mortgage, or getting other loans. It can also impact your ability to rent housing, open a checking account, or obtain auto insurance.

Even moderately scored credit can make borrowing money more expensive and reduce your choice of lenders.

How is your credit score calculated?

There are three major credit companies that collect and maintain credit scores. Each uses a slightly different credit scoring model, but your score should be similar on all three credit bureaus. They use a score between 300 and 850 with anything over 670 being considered “good.” Scores are typically defined by the following criteria:

  • Payment History (35% of your score) — this includes whether you have had late payments or non-payments and if you have ever filed bankruptcy or had wage garnishments or liens.
  • Amount Owed (30% of your score) — this is your credit utilization ratio or debt-to-income ratio that’s especially important when obtaining additional loans, like student loans.
  • Length of Credit History (15% of your score) — this is how long you have been creditworthy.
  • Newly Opened Accounts (10% of your score) — if you have opened several accounts recently, you may be considered someone experiencing problems with cash flow.
  • Credit Mix (10% of your score) — a favorable mix would include credit cards, installment loans, and a store account.

How long to increase your credit score?

It takes more than a day or two to get into a problem with your credit, and realistically, it will take some time and effort to improve your credit score.

From start to finish, count on about three to six months so be sure to leave ample time if you are planning on applying for a mortgage or refinancing your student loans in the near future.

5 best steps to improve your credit score

Whether you have poor credit or are looking for ways to improve your score and lower your debt-to-income ratio, here is a step-by-step process for how to improve credit fast.

  • Get a copy of your current credit report — It’s important to start at the beginning. Everyone is eligible for one free report per year from each of the three credit agencies. Contact the Federal Trade Commission for a simple, direct link or contact each company individually:  Experian, TransUnion, Equifax. Each company will transmit your report electronically for immediate review.
  • Dispute any issues immediately — Each credit company has a dispute process, so be sure to question every negative issue.  Utility companies, doctors’ offices, hospitals, and even parking tickets can potentially show up, so be sure to research and resolve every issue.
  • Pay all your bills on time — Going forward, be sure that all of your bills are paid on time. This is the single most important factor in improving your credit score and maintaining it.
  • Don’t open any new credit accounts — Adding additional open accounts is not the solution. Disregard those “preapproved offers” (at least for now) and resist the temptation.
  • Pay down credit card debt — Target one debt at a time. While you continue to make on-time payments on all your debt, select the credit card with the highest interest or the smallest balance and pay more than the minimum balance on that card until it is paid off. Then move to the next balance and repeat the process.

How student loan debt affects your credit

If you have numerous student loans, each from a different lender, they could be negatively affecting your credit score.

When possible, consider student loan refinancing which consolidates your student loans into one single payment – ideally with a lower interest rate – and one payment date. While your total balance may not be affected, the number of open accounts will be reduced and that could give you a positive boost to your score.

And if your credit score is very low, you may want to consider refinancing with a creditworthy cosigner such as a parent, relative, or close friend. Then you get the benefit of consolidated loans, a lower interest rate with lower monthly payment, and fewer open accounts – all while being able to build your credit history.

To get started with student loan refinance, use Purefy’s simple Compare Rates tool to see what student loan refinancing options and personalized rates you may qualify for – with no impact to your credit score whatsoever.

Compare Student Loan Refinance Rates with No Credit Check

Purefy’s tools let you compare savings from the best lenders.

earnest
penfed credit union
college ave student loans
iowa student loan

How good credit can save you money on student loans

Once you have repaired your credit, it might be time to look at refinancing your student loans to a lower rate, lower payment, and better repayment term.

With a good credit score, you may be eligible for far better interest rates and terms. And by ditching your student loan debt more easily, you’ll be in better position financially to pursue additional goals such as obtaining a mortgage or focusing on that dream vacation.

Get started with improving your credit score

Obtain your annual credit report and address any problems immediately. Once you know where you stand, systematically repair each negative issue and then create a budget that allows you to pay down your debt as quickly as possible.

And when you have repaired your score, be diligent and proactive in maintaining your hard-earned credit history. Review annually, pay on time, and consider refinancing student loans through a private lender to reduce open accounts and get a superior interest rate.

Calculating Rates...