How Long Does It Take to Rebuild a Credit Score?

Time To Read 3 MIN READ

Your credit score is something you might not think about until you need it. If you find yourself applying for new credit, your past credit missteps can catch up with you. Typically, a lower credit score translates into higher interest rates on everything from a home mortgage to a car loan. If you need to rebuild your credit, the sooner you start, the better.


Credit Score Components

Before you can work on repairing your credit score, you have to understand what affects it. A FICO score, which is the industry standard, ranges from 300 to 850 points. The highest scores, those above about 760 points, typically qualify for the best interest rates. 

Your credit score is typically affected by five factors: payment history, amounts owed, length of credit history, new credit and types of accounts or "credit mix." To help improve your score, it's good to focus on all of these factors.


Missed Payments

Your payment history makes up 35 percent of your FICO score, so if you're late on a payment, your credit score will take a hit. Missing a payment is a big no-no when it comes to credit scoring because while the drop in your score will be immediate, repairing that damage can take years.


Delinquencies — such as a missed payment — will stay on your credit report for seven years. You can improve your score over time, however, because the effect of the negative mark gradually diminishes (even if it takes seven years).


Major Delinquencies

You might find yourself in a major financial crunch even with careful planning. If you have to short sell your house or if you fall into foreclosure, your credit score will take a serious hit. For instance, a 790 FICO score can drop as low as 590 in these circumstances.


These types of delinquencies also show on your credit report for seven years. If you find yourself filing for bankruptcy, it can affect your credit score for 10 years. As with missed payments, the effects of these actions diminish over time, but they won't completely fall off your report for seven or 10 years.


Minor Dings

Applying for new credit accounts for 10 percent of your score. Although you shouldn't apply for every new credit card you see, a new application will only drop your score by a few points, and the inquiry will only remain on your report for two years. An "inquiry" is a request by lender to check your credit. Even though it appears on your report, it will no longer affect your FICO score after one year, so this damage is easily repairable. 

Your credit mix reflects the type of credit accounts you have, such as revolving credit card loans, home mortgages and auto loans. This also accounts for 10 percent of your FICO score. Lenders like to see that you can handle different types of credit, so having a good mix helps your score. Your score won't necessarily go down if you only have one type of credit, such as a credit card, but it could hold you back from having a higher score. 

Accounting for 15 percent of a FICO score, the length of your credit history can only improve over time. The longer you hold credit accounts, the more beneficial the effect on your score. To repair damage to your score caused by having a lot of young accounts, hold off on applying for new accounts until your existing accounts age a few years.