A strong credit score sets the tone for your overall financial health. A good credit profile can unlock economic opportunity in the form of better rates on your loans, including credit cards, auto loans, mortgages and student loans. There are no shortcuts to getting immediate credit score improvement, but there are tactics to employ that can help you reach a higher number. Here’s what to know about how to make moves to build credit and raise your credit score as efficiently as possible.
Starting out: How long does it take to build credit from scratch?
Building credit from zero won’t happen overnight. If you haven’t yet started to establish a credit profile there are steps you can take to get the ball rolling.
Some of the fastest ways to build credit include:
- Becoming an authorized user on someone else’s credit card. You can ask a relative or trusted friend to call their credit card company and add you as an authorized user. Their good payment behavior will be reported to the three major credit reporting agencies and you can piggyback off of their credit history to start building your own.
- Opening a credit-builder account. This is a type of installment loan where you deposit funds with a lender, typically between $300 to $1,000 as collateral and pay back the lender in monthly installments. In turn, the lender will report your on-time payment behavior to the credit bureaus so you can build up your credit. At the end of the loan term, your money will be returned to you.
- Getting a secured credit card. A secured credit card also allows you to deposit funds to use a collateral to make you less risky for the lender, and in turn your on-time payment behavior will be reported to the credit bureaus. However, with a secured card, you can potentially have a higher credit limit than a credit-builder loan which may offer a better boost to your overall score. Keep in mind that a higher credit limit may also mean a bigger upfront deposit.
Whichever of these methods you choose, it can still take 30 to 45 days for your new credit line to be reported to the credit bureaus. The exact amount of time will depend on the timing of your lender and what date they report to the bureaus.
Building back better: How long does it take to improve my credit score after bankruptcy?
Bankruptcy can stay on your credit report for seven to 10 years so improving your credit score significantly may be difficult during that time. However, there are some steps you can take to set yourself up for future success including:
- Reviewing your credit reports for errors. Any accounts that were settled or charged off during bankruptcy should no longer be showing as “open” lines of credit. Make sure everything is up to date and accurate so it doesn’t further impact your score. If something is incorrectly reported as an open line of credit with a balance, it can continue to adversely affect your profile. Disputing inaccurate information can take between 30 and 45 days to resolve.
- Opening a line of credit. It may seem counterintuitive, but you need credit to build strong credit. It can be challenging to get credit right after a bankruptcy. Your best bet is likely to be a credit-builder loan, which should report to the three major credit reporting agencies about every 30 days.
- Making all of your payments on time. Timely payment behavior makes up 35% of your score.Lenderswill typically focus on the previous 24 months when reviewing your credit history. So, it’s possible to start to see some meaningful improvement post-bankruptcy within two years of responsible payment behavior.
Some people may start to see some improvement after bankruptcy within 12 to 24 months. However, it’s important to recognize that you aren’t going to springboard from bankruptcy to excellent credit in just a few months. Building good credit takes time and consistent payment behavior over at least a few years.
Short-term moves for long-term success
The quickest way to improve your credit score is to address the factors that may be dragging your score down. Your credit score is made up of five factors: payment history (35%), the amounts you owe (30%), the length of your credit history (15%), new credit (10%) and credit mix (10%).
There’s no fast actions to improve your payment history or the length of your credit history, but you can change the amount of debt you owe to your credit cards. If you have the cash available, paying off your credit cards, especially if you have a high debt-to-available credit ratio, can help you see a rapid improvement in your score as soon as your issuer reports your payment to the credit bureaus, so it could be within 30 days or sooner.
Adding a new type of loan to your credit mix can be good for long-term credit score improvement, but it’s far from a fast fix. Anytime you apply for a new line of credit, a lender will do a hard credit check on your credit profile and that will temporarily cause your score to drop a few points. A new line of credit can also decrease the average age of your accounts which can have an adverse effect on your score.
Another tactic might be to ask your credit card issuers if they can offer you a higher credit limit. Having more available credit can reduce the amount you owe on your cards relative to your total credit limit and in turn give your score a boost.
The bottom line
Whether you’re just starting out, bouncing back from bankruptcy or simply want to get better rates on your loans, pursuing better credit is worth the effort. But strong credit is built over time, and although there’s no exact prescription to expedite the process, some actions may yield faster results.
When it comes to the amount of time it takes to improve your credit score, keep in mind that someone starting from scratch will be more likely to see significant score increases at first than someone who already has great credit, since there’s less room for improvement.
Make sure to pay all of your bills on time and to practice responsible credit behavior to see results. Some improvements may be as quick as 30 days, others may take several months or years, but all efforts to boost your score are worth it.
