How Quickly Can You Improve Your Credit Score?

People often ask me how long it takes for negative information to no longer appear on a credit report and how many points they can see their score rise when that happens. The answer depends upon how “bad” your bad credit history is. Some credit infractions are more serious than others and will logically take longer to fix. 

Fortunately, there are relatively few infractions that result in permanently bad credit, as long as you don’t become a habitual credit abuser. You might even be able to “repair” your credit history to some extent and improve your score faster.

Time is your friend

Assuming whatever took place that caused your credit score to nosedive (missed payments, collections activity, liens, judgments, bankruptcy, etc.) is no longer happening, time alone will begin to heal your credit score. Thanks to the Fair Credit Reporting Act, a statute of limitations applies to credit reporting agencies, so your prior credit indiscretions won’t be reported forever. More good news: the older a negative item is on your credit report, the less it drags down your score.

Here is a summary of what actions appear on your credit report and for how long:

2 years:

  • Credit inquiries, such as when you apply for a credit card, mortgage, auto loan, etc. However, only inquiries within the previous 12 months are included in your credit score. Conducting your own credit score inquiry does not affect your score.

7 years:

  • Late payments (from the date of the most recently missed payment)
  • Charged off accounts (from the original delinquency date)
  • Collections accounts (from the original delinquency date reported by the original creditor)
  • Foreclosure (from the first missed mortgage payment)
  • Civil claim judgments (from filing date)
  • Chapter 13 bankruptcy (from filing date)

10 years:

  • Chapter 7 bankruptcy (from filing date)

Forever:

  • Open accounts with positive payment history. This is a good thing! Continuing to add positive, on-time payment history can help offset some of the older negative activity.
  • Delinquent Perkins (student) loans
  • Unpaid tax liens (though reporting agencies may drop them after 10 years)

As you can see, if you do nothing other than keep good credit habits going forward, most negative credit activity can eventually “fall off” your credit report in 7 to 10 years. Consumers are usually in a bit more of a hurry to fix ailing credit scores, however, but what can they do?  Your credit report is a history of previous activity (or inactivity). Once done, the historical record that is your credit report is more or less permanent for the next seven to ten years – or is it?

How to (possibly) remove negative items from your credit report

Although some negative credit history is there for the 7-10 year duration, there are a few things consumers can do to potentially remove negative credit activity sooner. Removing even a few negative entries could add up to many positive points on your credit score. The process will require some of your time and in some cases, money.

Here are some tips that might get some of those negative entries on your credit report dropped sooner rather than later, along with potential credit score improvements:

  • Late payments: If you made a loan or credit card payment late, the lender most likely charged you a late fee. They probably made an entry on your credit report about the late payment as well, which brings your score down. Call the lender and ask them (nicely) if they could remove that pesky late fee now that you are current on your payments. Often, when they remove the late fee, they also drop the late payment from your credit report. Potential credit score boost = 5-60 points.
  • Charged-off or settled accounts: These can be difficult to remove because, well honestly, you didn’t pay back what was owed. Subsequently, the lender wrote it off as a bad debt (and may have sold your bad debt to a collection agency). However, you might still be able to remove this blemish from your credit report in two relatively easy steps:
    1. Offer to pay the lender or collector what is owed (or a smaller amount if you choose to negotiate your debt) in exchange for a letter stating you have paid the debt.
    2. File a dispute with the credit reporting bureaus stating the account has been paid. Potential credit score boost = 15-75 points.
  • Auto repossession: This is a tough one. If your auto loan is with a smaller local lender, you might be able to dispute it with the credit bureaus. If the lender does not verify the loan status with the credit bureaus within 30 days, then under the Fair Credit Reporting Act, the credit reporting agencies must drop the item from your credit report. Keep in mind, this is not necessarily a permanent fix and it is a bit of a technical grey area (you did owe money on the vehicle, right?). However, if it does work in your favor (or when it falls off your report over time), the potential credit score boost = 30-80 points.
  • Bankruptcy or foreclosure: These are the biggies, and they are going to stay on your credit report for 7 to 10 years. No shortcuts available here. Once they fall off due to the time expiration, however, the potential credit score boost = 30-60 points.

Fortune favors the bold

While there are no guarantees that taking steps to repair your credit on your own can improve your score faster, what have you got to lose by trying? In case you are thinking about hiring a credit “repair” company to do it for you, save your money. Many of them will offer to settle debts at a reduced amount and/or dispute items on your credit report – steps you can easily do yourself. 

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