Credit repair is the process of fixing a poor credit standing. Sometimes this term is associated with companies that offer credit repair for a fee. But there is nothing that credit repair companies can do for you that you can't do yourself. If you are needing some help with restoring your bad credit back to health, read on.
Often, credit scores suffer after some type of financial setback, such a job loss, or a large, unexpected expense that makes it difficult to keep up with your monthly payments. If you don't have an emergency fund, and your accounts become delinquent 30 days or more, that negative payment status will show on your credit report.
Serious delinquency could lead to the account being turned over to a collection agency. Either of these will have a very negative impact on your credit scores.
So, if you have had delinquencies, how long will the credit repair process take?
Unfortunately, there's not a shortcut. The length of time it takes to rebuild depends on how many delinquent accounts you have, how delinquent those accounts are, whether or not you have a bankruptcy filing. Depending on your situation, you might start to see improvements to your score in several months, but It could take several years if you have many delinquent accounts or other negative marks on your credit report.
Negative information, such as collections and late payments, will remain on your credit report for 7 years, while certain public record information, such as Chapter 7 bankruptcies, remain for up to 10 years.
As times goes on, negative information on your credit report will affect you less and less, but serious delinquencies, such as charge-offs, collections and bankruptcy will take more time to recover from than a couple of missed or late payments.
Pay Attention to the Factors Affecting Your Credit Score
Keep in mind the two most important factors in determining your credit scores are payment history and credit utilization rate.
Payment history is used to determine if you are paying your bills on time and if you are paying the amount you agreed to pay. Credit utilization ratio (or credit utilization rate), is the ratio of all your credit card balances in relation to your credit limits. Your credit utilization ratio should be 30% or less.
Managing these two items going forward without any glitches will have the greatest positive impact on your credit scores.
3 Steps to Repair Your Credit
- Bring any accounts that are currently past due up to date and make sure that you pay at least the minimum payment due before the due date. Set up automatic payments to make sure you don't miss due dates.
- Tackle accounts where you are over-utilized first, meaning your balance owed is close to your credit limit—with the aim of getting your credit utilization to 30% or less.
- Order a copy of your credit score. If you get a FICO® Score* from Experian, you will receive a list of the top factors that are currently affecting your score the most—either positively or negatively.
Although repairing your credit can take some time, the benefits and cost savings are worth the effort. Good credit scores give you access to the best interest rates and best terms for loans and credit cards. Keep your balances low and make all your payments on time going forward, and your credit score should continue to improve.
Check out these additional articles about repairing and rebuilding your credit:
- Why Do I Have So Many Credit Scores?
- How Do I Improve My Credit Score?
- How to Get a Car Loan If You Have Bad Credit
You can get more information about how to monitor, protect and manage your credit here at experian.com/education. If you have questions, submit them through Experian's Facebook or Twitter with the hashtag, #AskSusie. You can also email me your questions directly at AskSusie@experian.com and I will answer them here.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on June 20, 2018, and has been updated.
*Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn more.