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How Long Does It Take to Restore Damaged Credit?

how long does it take to restore credit

The process of repairing or restoring a damaged credit score can take anywhere from several months, to several years, depending on how badly the person’s credit has been damaged. In most cases, it takes at least three months for a noticeable difference to be seen on a person’s credit report, primarily because the three major credit reporting agencies file reports quarterly. There are several factors that determine the amount of time it takes to restore damaged credit, including how much debt is owed, how many negative items are filed on an individual’s credit report, and the income of the individual. With the proper mindset and debt reduction techniques it is possible to significantly decrease the amount of time it takes to restore damaged credit.

Maintaining Ideal Utilization Rates

The utilization rate, also known as the debt-to-credit ratio, is basically the percentage of your overall available credit line that is being used at any given time. In other words, if you have three credit cards, and each card has a $1000 limit (giving you a $3000 overall credit line), and you currently owe $500 on each account (giving you a $1500 overall debt), then you would have a utilization rate of 50%. Ideally, if you want to maintain the fastest rate of repair for your credit score you need to never utilize more than 30% of your available credit, as consistently using a large amount of credit may indicate to credit reporting agencies and potential lenders that you are financially desperate, especially if you’re then unable to make repayments.

Preventing Additional Debt

While it may seem easy to avoid additional debt, simply by not applying for new credit cards, it is possible for your existing debts to create unnecessary

additional debt. In other words, a single late or missed payment towards one of your existing credit card debts could cause a penalty interest rate to be applied to the account, thereby creating a significant amount of additional debt. Many people also overlook the fact that they are creating additional debt every time they allow their balance to roll over into the next month. While it may not be possible to repay your entire balance in one month, it is advisable to repay all new unavoidable purchases before the end of the grace period, after which interest is applied to the balance.

Perhaps the most important aspect of expediting the process of restoring damaged credit is avoiding late or missed payments at all costs. A single late payment on one of your credit accounts can result in a penalty interest rate being applied to all of your accounts simultaneously, due to the universal default clause. Many cardholders make the mistake of issuing a payment via check at the last moment (right before the payment due date) because they failed to properly budget or schedule the monthly repayments. Sadly, it does not matter when the payment is issued, as it can still be counted as a late payment if it is not posted to the account before the due date. Thus, it is best to schedule automatic transfers from a checking account during the least financially stressful time of the month (i.e. – shortly after receiving a paycheck). Once you’ve repaid all credit card debts it would be wise to begin using about 20% of your overall credit each month, and then repaying the balances in full and on time as much as possible to see the fastest credit rebuilding results.

Category: Credit

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