After years of suboptimal financial behavior, you are on the right track and wonder how long you will have to wait for your new financial habits to improve your credit score. The short answer: There is no set time period for new financial habits to improve your credit score, but you can do a lot to shorten that period.
Fix what’s broken
In order for your new financial habits to improve your credit score, the first thing you should do is pull your credit report. You can get one for free from each of the three credit bureaus by visiting www.annualcreditreport.com.
Next, you aren’t going to make much progress if there is negative information on your credit report. So if you’ve detected errors, you need to file disputes with the issuers or credit bureaus right away. Get those blemishes off your credit report immediately. That alone will boost your score within 30-45 days.
Creditors usually report information to the bureaus shortly after the statement closing date, and it takes a few days to show up.
Get with the program
Next, if you are on the tail end of getting your financial house in order, and that includes creditors that are still reporting late payments, you need to resolve that issue. So make sure you go through each and every creditor account and make certain they are paid up. This should also filter through in about 30-45 days.
Now that you’ve gotten rid of the negative stuff — and since your new financial habits will be improving your credit score — you can start working on the positive reporting. You want as much positive reporting as possible to flow into your credit report.
Accentuate the positive
Thirty-five percent of your credit score consists of your payment history, so the most important thing you can do going forward is to pay all creditors on time, every time. No exceptions. Do anything you have to in order to remind yourself of payment dates.
One suggestion: having bills paid automatically from your bank account. Just make sure there’s always money in there or that you have overdraft protection.
Thirty percent of your credit score consists of how much you owe, also known as your debt utilization rate. This is the ratio of how much debt you have outstanding divided by the total credit lines you have. The smaller this ratio is, the better.
Therefore, if you are able to pay down your debt in large chunks, do so!
The other 35% of your credit score is related to length of credit history, new credit and kind of credit used. These won’t matter too much because you probably don’t want to apply for new credit for at least a few months. Six months or so from now, you may want to try to get a new kind of credit to help these criteria a bit, but it’s not a big deal.
The waiting game
The length of time it will take for all of this behavior to filter into your credit score will depend on a few factors.
- If you have a lousy score, there’s nowhere to go but up. You are likely to see larger increases in shorter periods of time if you have lousy credit.
- If you are proactive about rebuilding your credit, you will see higher scores more quickly.
- Diligence pays. Missing just one payment and having it late by more than 30 days could destroy all your hard work.
- It will likely take a minimum of six months to see significant score changes, and possibly as long as 12-18 months, depending on how bad your credit was.
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