How Long Does It Take to Rebuild Credit? (4 Simple Steps)



If you’re trying to rebound from a major financial nosedive, it may seem like you’ll never get your credit back on track. Maybe you’re overwhelmed by credit card debt, or you lost your job and got behind on all kinds of bills.


No matter what has happened in your past, there is always something you can do to take control of your finances and your credit. It might take some time, but it is possible. So just how long does it take to rebuild your credit? Read on to find out.

How long does it take to rebuild your credit history?

Your credit score reflects the information on your credit report, so you have to take into account what items are listed, how much impact they have, and how long they stay on there.

Most negative items, such as late payments, charge-offs, and foreclosures, stay on your credit report for up to seven years. However, chapter 7 bankruptcies and unpaid tax liens stay for up to 10 years.

If these items are accurate and all of the proper protocol was followed by creditors, it can be difficult to get them removed from your credit report ahead of schedule. However, it’s important to know that their effects on your credit scores lessen over time, despite still being listed on your credit report.

How can you find the problem areas on your credit report?

Before even thinking about rebuilding your credit, you have to figure out exactly what’s wrong with it. Start by ordering your credit report for free from each of the three major credit bureaus.

Once you have your credit reports, carefully review each one to see what information is reported there. Lenders don’t just look at your credit score. They also look at your credit reports to see what is contributing to your credit score.

You may see a list of negative items. For example, you might see a late payment listed here, including how far past due it was. You’ll also see a list of your accounts in good standing and a list of credit inquiries made over the last two years.

Assuming everything you see is accurate, you’ll have a good sense of what items you need to work on, either through actions you can take today or simply by waiting.

How to Start Rebuilding Your Credit

Once you know what type of credit you’re working with, you can take a few different steps to start rebuilding. Some items take a while to make a difference in your credit score, while others begin to have an impact right away.

Either way, these tips are necessary to maintain healthy credit, even if some major items simply need time to repair themselves.

Pay Your Bills on Time

Maybe you’re living paycheck to paycheck, or perhaps you just ignore due dates. No matter your attitude towards paying bills, it’s time to shift your mindset and pay them on time.

Being just 30 days late on credit card payments can cause your credit score to drop more than 100 points. And the real kicker? The higher your credit score is, to begin with, the more points you’ll lose. So if your credit score is already in the high 700s or even the 800s, it’ll drop on the higher end of the range for any infraction.

Bottom line: take care of those bills every month. Sign up for automatic bill pay that comes out right on payday if you have to. Also, note that this rule doesn’t just apply to credit cards and loans.

Just about any credit card issuer, lender, or creditor can report a late payment to the credit bureaus, even your cell phone carrier or utility company. So get out the calendar and make a plan to pay each bill before it’s due.

Keep Your Debt Low

Owing a large amount of debt can hurt your credit in various ways. There’s an entire category devoted just to your amounts owed, accounting for nearly a third of your credit score. And there are several different ways in which your debt level is analyzed for your credit score.

First, it’s important what kind of debt you have. Revolving debt like credit cards is not looked upon favorably because the debt is unsecured. There is no physical property that credit card companies could seize if you stop paying your credit card balances. Plus, there’s no potential for any type of growth in value.

Whatever you purchased with your credit card probably won’t garner more money than you paid for it, and probably not even face value at that.

On the other hand, installment loans are scored better because they usually have an asset tied to them (like a mortgage or car loan.) They potentially offer some type of added value, like equity in your home.

Credit Utilization Ratio

Another reason to keep your debt low is that your credit score considers your credit utilization ratio. This refers to the amount of credit you have access to compared to the amount you use.

It’s OK to have a couple of credit cards, and the higher your credit limits are, the better it is for your credit. But the more you charge (and don’t pay off), the more that credit limit shrinks.

Ideally, you don’t want to use any more than 30% of your credit. So if your credit card limits total $10,000 and you only have a $2,000 balance, then you’re only utilizing 20% of your credit limit.

To quickly rebuild your credit, try to pay down any debt you have to get your ratio under 30%. You should notice an uptick in your credit score after a month or two.

Think Twice Before Opening New Accounts

You might think that getting a credit card is a great way to lower your credit utilization ratio without having to pay down debt. Just get a new card to increase your credit limit, right?

Not so fast. Your credit report is an intertwined web of information, and making one seemingly simple change can have ripple effects you didn’t account for.

There are several ways that opening a new account could cause harm to your credit. For starters, you’re increasing the amount of revolving credit in your credit mix. That’s not going to help your credit score at all.

Credit Inquiries

Hard inquiries also hurt your credit scores. Sure, it’s just five or ten points, but that can add up if you’re applying for several cards at once. Plus, each of those inquiries remains on your credit report for two years!

Finally, new accounts shorten your average length of credit because you’re essentially adding a big fat zero that brings down your more seasoned accounts.

It’s OK to get a new credit card if you need one for a specific reason, but don’t open one solely in an attempt to rebuild credit. You’ll probably end up doing more damage in the long run.

Don’t Close Old Accounts

On the same token, closing an old account could hurt your credit score by inadvertently raising your credit utilization ratio. Closed accounts still contribute to your credit history length for another ten years, but they won’t count towards your available line of credit.

If you’re considering closing an account because you can’t control your spending, try locking up your cards or keeping them with a trustworthy family member.

You may also want to delete any saved credit card information on your phone and laptop so you’re not tempted to make quick-click purchases. Of course, keeping your debt on track is most important. However, if self-control isn’t an issue, then you’re probably better off keeping your current accounts open.

Secured Credit Cards and Credit Builder Loans

Rebuilding credit can be challenging if you don’t have many positive accounts on your credit history. One of the easiest ways to add positive information is by getting a secured credit card or credit-builder loan. You can get approved for them even if you have a bad credit score. In fact, they were designed specifically for people with bad credit.

Both of these accounts were created for people to build credit by making small monthly on-time payments. The credit card company reports your payment history to the credit bureaus, which can really help you build good credit and improve your credit score.

What factors affect your credit scores?

Although there are five separate categories, they overlap in several ways. Here’s how they break down:

  • Payment History (35%)
  • Amounts Owed (30%)
  • Length of Credit History (15%)
  • Credit Mix (10%)
  • New Credit/Inquiries (10%)

Opening a new credit account, for example, may increase your overall available credit. However, the brand new account also lowers the average length of your credit history and adds a new inquiry to your credit report.

That’s three different categories affected by one action, with one potentially positive change and two negative ones. Plus, each person’s credit score is weighted differently depending on the entire credit profile.

Bottom Line

Everything is relative. It’s nearly impossible to figure out exactly what effect your financial decisions will have on your credit scores.

Rather than trying to manipulate potentially positive impacts, focus on the sure-fire wins like paying your bills and lowering your debts owed. They might take longer to rebuild your credit score, but you don’t run the risk of an unforeseen domino effect by muddled decision-making.

If you need more help, consider contacting a credit repair company. They help clients rebuild credit by removing negative items from their credit reports. Check out our list of the top credit repair companies.