Your credit score represents your level of creditworthiness based on your credit history. The lower your credit score, the less trustworthy you appear to lenders and other financial institutions. If you have a poor credit history, the only way to improve finances is to establish a better credit history.
Unfortunately, you can’t build a more trustworthy credit history overnight. But it doesn't have to take years to do a bad credit fix in most cases. The approximate time to significantly improve your credit score depends on the type of negative marks on your credit report and credit activity. By the end of this entry, you should have a general idea of how long it will take you to repair your credit.
What Qualifies as Bad Credit?
Most credit bureaus have a credit scoring range between 300-850. If you have a credit score below 580, most lenders consider you a greater credit risk than someone whose score falls within the national average of 580-669. Your credit score is the most significant qualifier of bad credit. However, not all lenders use the same approval standards. For this reason, there is no standard cutoff score lenders use to make their approval or interest rate decisions.
Top Reasons to Repair Bad Credit
The consequences of having bad credit may be more harmful than you realize. Along with hindering your ability to get a loan or credit card, a bad credit rating could play a critical role in many aspects of your life, including:
- Buying or renting a home
- Purchasing a car
- Getting an insurance policy
- Starting a business
Even if you get credit approval for these ventures, a low credit score can cost you money from higher security deposits, larger down payments, and steep insurance premiums. You may also have to settle for less of a house than you wanted or a cheaper car.
On top of that, you may endure the annoying (and sometimes crippling) challenge of having to pay cash for everything or the harassment from debt collectors. The reality is more businesses are considering your credit in their decision-making.
Timeline to Repair Credit
Suppose you have a credit score in the mid-500s. The time it takes to raise your score to the fair zone depends on the type of negative marks on your credit report.
The following list will help you determine how long it will take to recover from each type of mark.
Hard Inquiry
Although a hard inquiry remains on your credit report for two years, it shouldn't impact your credit score for over 12 months. A hard inquiry happens when a lender requests access to your credit report from a credit bureau. This event only happens when you apply for a loan or credit card.
Although it may vary, one credit inquiry amounts to less than a five-point deduction from your FICO credit score. If you don’t have any other significant demerits on your credit report, you can rise from the mid-500s to the fair credit range within a few months.
Missed Payments
Missed payments can remain on your credit report for seven years. The good news is that you can offset the negative effect of a few missed payments with 3-5 months of building a solid payment history. So, it's possible to raise your credit score from the poor fair credit range (580-669) within that period.
Collections
If your lender puts your missed payments into collections, the impact hits harder on your credit score (pointwise) than missed payments. This negative mark stays on your credit report for seven years. But its impact on your score fades within two years. By lowering your credit utilization, your credit score can move to the fair zone in about six months.
Bankruptcies and Foreclosures
Bankruptcies and foreclosures can deliver a damaging blow to your credit profile. If your credit score is in the poor range, bankruptcy will lower your credit score by 130-150 points, and foreclosure will lower it by 85-105 points. In addition, a foreclosure and Chapter 13 bankruptcy stay on your credit report for seven years.
Since a Chapter 7 bankruptcy discharges all your unsecured debt, it remains on your credit report for ten years. But you can prevent any bankruptcy type or foreclosure from suppressing your credit score for seven to ten years with efficient financial management. With effort, you can raise your credit score from the mid-500s to the fair credit zone within 12-18 months.
One of the most effective methods is taking out a bad credit loan through Jora Credit. By paying off this loan through an installment payment plan, you can make the progress necessary to heal your credit score. An installment loan plan has a fixed payment schedule to improve your credit mix and payment history. Also, you can use the lump sum of cash from the loan to settle or consolidate old debt.
Pooling Your Resources to Repair Your Credit
As you discover the resources available to help you improve your credit management, repairing your credit may not be as long as you thought. One exceptional resource for restoring your credit is Jora Credit. We provide a broad selection of easy-to-apply personal loans with a fast approval and funding process. Apply now for your Jora loan.