Repairing your credit score is indeed possible, but knowing how long it takes to fix it differs from person to person.
For instance, someone who missed several payments over a short span may expect a longer time before his credit score gets fixed. On the other hand, someone who had minimal missed payments may have theirs fixed in a shorter period, provided they diligently settled their statements over the past few years.
Not knowing how long it takes to repair your credit can be discouraging, especially when you’re just starting back up again after a financial crisis. However, fixing it now could help you with your plans in the future.
Don’t let this roadblock stop you from following your dreams – may it be a house, a start-up business, or a vacation.
Here are seven easy steps to get back on track with your credit score:
Step 1: Review your credit report and identify inaccuracies.
Probably the first thing to do to lessen the time it takes to repair your credit is to check the credit reports you have for the past years.
In this step, you’d be able to see all of your expenses per time frame and be able to reflect on any spending habits that may need correcting.
Moreover, you should check for any discrepancies that may need correcting. These discrepancies may be an amount deducted from your credit twice, an item you’ve never bought, a loan you’ve never applied for, or a new credit account you’ve never opened.
After identifying any mistakes on your credit report, filing for a dispute to remove these inaccuracies could help in reducing the time it takes to repair your credit.
Step 2: Dispute inaccuracies in your credit report.
Combing through your yearly credit report can require so much time and effort, but it’s going to be worth it, especially if it means substantially decreasing the time it takes to repair your credit.
After listing the inaccuracies from your credit report, it’s essential to gather evidence to prove these corrections. These may include the receipt showing the original price of your purchase or a loan application indicating a wrong address.
Afterward, draft a dispute letter for each inaccuracy you’ve want to have corrected on your credit report.
Indicate essential details such as:
- Your name and address
- The name and address of the company you’re filing a dispute with
- An explanation of the error you wish to be corrected
- The correct detail that should be in your credit report
- A list indicating what verifying documents are attached in your letter
Credit agencies usually take 30 to 45 days to respond to a dispute, but the steps to be done on your end shouldn’t take long, provided you already have the necessary documents for the dispute.
Otherwise, make sure to follow up on them frequently to check on their progress.
Building Back Your Credit Score
Now that you’ve settled inaccuracies in your report, the next thing you can do is to build positive items in your credit.
However, some items such as charge-offs, hard inquiries, and late payments stay in your report for at least two years. Bankruptcies that involve the liquidation of debtors’ assets can remain in your credit report for up to 10 years.
While these negative items stay in your record for a while, the following steps could greatly help in building your credit moving forward:
Step 3: Create a budget.
So how can building a budget help in repairing your credit? Simply because strictly following a budget can help you ensure you don’t go overboard in your spending.
It also means you’re less likely to skip any monthly payments, which is one of the main reasons for a negative item in credit reports.
Always set aside money for your needs and enough to pay your credit for each statement period. Knowing what necessities vs. luxuries can help you cut down on unnecessary expenses too!
Sure, budgeting could take lots of trial and error, but handling your money and expenses will be convenient once you get the hang of it.
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Knowing what credit bureaus prioritize the most would greatly help build more positive items in your credit.
Currently, three main factors affect your credit: payment history, credit utilization percentage, and credit card history.
Step 4: Pay your credits on time.
Your payment history shows how you’ve paid your credits over some time. It shows if you pay your accounts on time or not. It also takes up about 35% of your credit score and is likely one of the first things lenders check on your report.
Paying your credit on time moving forward will help increase your credit score. If you’re having financial difficulties during the current month, pay for the minimum amount instead. Make sure to pay before the due date!
Step 5: Lower your Credit Utilization Ratio.
To better improve your credit score, keep your credit utilization ratio at a minimum. Your credit utilization ratio is your credit card balances over your credit limits.
The basic principle is to keep it at below 30% utilization ratio. This doesn’t just help you in repairing your credit; it also ensures you wouldn’t end up struggling to pay a hefty bill at the end of each statement due date.
Step 6: Slowly build up an emergency fund.
When you’ve finally crossed out the majority of your credit, saving up for an emergency fund should be your next goal.
An emergency fund is your safety net for any future financial mishaps. This may include hospital bills, losing your job, or a broken car. Financial advisors recommend having at least three months’ worth of expenses as your emergency fund.
With an emergency fund to back you up, you would be able to protect your budget and pay off any sudden expenses. This means no additional negative items in your credit score!
Starting small isn’t a bad start; just set aside a small amount per payday. You will thank yourself later.
Step 7: Build up a habit to regularly check your credit report, budget, and expenses.
Having to deal with another financial crisis is the worst thing that we want to happen. To prevent this, regularly check your statements, expenses, and budget plan.
A quarterly check on your credit reports would be much easier than going through a massive pile of paperwork annually. An increase in your salary or renting a new apartment means your budget may need a bit of tweaking.
You may find yourself making little to no changes in your reports and budget at times, but these financial check-ups ensure that you’re still on the right track in reaching your goals.
Continue to track your progress even after repairing your credit. For every financial milestone you’ve achieved, don’t forget to pat yourself in the back – you’ve gone a long way to reach this far, after all!
