So, you’ve decided to get serious, fix your credit issues and build healthier credit. Way to go! Often, the first question I’m asked by folks working to improve their credit is, “How long will it take for my credit score to improve so I can … buy a home, pay for my wedding, afford college and so on?”
If you’ve paid more than 30, 60 or 90 days late on accounts, your creditors will report that to the major credit bureaus and the derogatory information can remain on your report for approximately seven years. If you ignored a collection that was reported to the bureaus, it will stay on your credit report as well. However, you can start the healing with a plan.
Much of your success in raising your credit score and how long it takes depends on you. But if you stick to my plan, which I’ve outlined below, you’ll be on the fast track to healthy credit.
First, let’s agree on what not to do:
- Pay your bills late.
- Remain disorganized.
- Max out your credit cards.
- Lack a plan.
Below, I’ve mapped out your plan. Follow these steps and you will be on your way to a healthier credit score.
1. Order Your Credit Reports
Your first step to healthy credit is knowing where you stand. Starting now, order your credit reports. (You can pull your credit reports for free each year at AnnualCreditReport.com and see a free credit report summary, updated each month, on Credit.com.) You may want to check all your credit reports twice a year, though you’ll likely have to pay for a second set. It’s a great way to track your progress, as well as keep an eye on your credit accounts to watch for any signs of fraud or identity theft. Examine reports carefully for any inaccuracies, and have the appropriate creditor and credit bureau correct them.
2. Keep Balances in Check
To raise your credit score, you will need to pay down any revolving credit balances worth up to 20% of your total credit line. Keep balances at those low levels by not charging up your credit cards and making sure you pay down new charges.
3. Resolve Accounts in Collections
If you have any accounts in collections or late payments due, take care of them as soon as possible. If you paid accounts late in the past but now pay them on time, you’ll stop receiving late charges. A collection that gets paid will be reported as such and remain on your credit report.
4. Rebuild With New Accounts
Once you’ve addressed the credit issues of the past, begin to rebuild your credit by making sure you have a nice variety of credit accounts. Consider taking out a credit card, car loan, mortgage, store credit card or even a secured personal loan. The key to a good variety is not getting in over your head, so be smart and conservative.
With these few simple steps, you will be on the quickest route to building healthier credit and achieving your financial goals.
More on Credit Reports & Credit Scores:
- The Credit.com Credit Reports Learning Center
- What’s a Good Credit Score?
- How to Get Your Free Annual Credit Report