Having a poor credit score can dampen your ability to secure credit, be eligible for better interest rates, be accepted for a mortgage. So whether your credit is just less than adequate, or verging on very poor, you may be asking yourself how long does it take to improve your credit score?
It’s important to note that your credit score will not improve overnight. Building your credit score is about playing the long game. However, it can take several years to raise your score to an acceptable level and only a couple of missed payments to undo all your hard work.
So if you’ve found yourself wondering, what can I do to improve my credit score? And how long exactly will it take? Read ahead to find out.
Before we dive straight into how you can fix your credit score it’s important to know what factors affect your credit score so you don’t make the same mistakes later down the road.
Your credit score is a complex combination of several factors that work together to either make or break your ability to acquire affordable credit.
While there are many different means of finding out your credit score, with Experian using CAIS ((Consumer) Credit Account Information Sharing), Clearscore using Equifax, FICO have detailed five factors that affect your credit score.
Hands down the most important factor that makes up your credit score is your payment history. With lenders more than anything else wanting to know your ability to make payments reliably, your credit history is the most telling means to find out.
Another strong contributing factor of your credit score is the amount of money you have borrowed. While this isn’t necessarily a negative point in your favour, lenders will look at your credit utilisation as a means to find out how reliant you are on borrowing and to check your credit management.
As a general rule of thumb the longer your accounts have been open the higher your credit score. This is due to the fact that you’re able to show you can demonstrate a long-standing relationship with credit providers. The more (positive) data available the better, as it only works in your favour to prove your reliability to possible lenders.
10% of your credit score is monitoring how much new credit you are applying for. If you’re making numerous applications in a short period of time it can be interpreted as being overly reliant on borrowing. If possible it’s best to spread out applications, so if you’re looking to lease a car, maybe hold of a few months on getting a credit card.
When working out your credit score a small portion of the score is made up of your mix of credit. So if you have a loan, credit card, mortgage, car lease, these are all opportunities to show your ability to reliably make repayments in different situations.
Depending on where you’re getting your information, the frequency of your reports can vary. The standard is anywhere between 30 days to 45 days, while other credit score providers may be more or less frequent depending on how strict they are with lenders submitting their information.
While improvements can be seen pretty much straight away (when your next report appears) positive updates can be offset by negative strikes on your account also. If you were to secure a low-interest rate loan (good), but at the same time were to miss a payment (bad), you may not see your credit score improve. Or worse, your credit score will drop.
Making it all the more important not to just work to improve your credit score, but maintain it by making sure you’re still making payments on time, not applying for too many credit applications, not over-utilising your available credit etc.
The same can also be said when acquiring new credit, such as a loan, or credit card, while this is a good thing being able to show a mix of different types of credit and will lower your overall credit utilisation, you will see a dip to start with. The first couple of payments need to be made on time before you can regain your original score, never mind starting to improve it.
Now can you see why improving your credit score is a long-term venture that needs to be consistently catered to.
As previously mentioned it can take years to build your credit score and just five minutes to do permanent damage. Since lenders like to paint a full picture of your credit history, they work with as much data as they’re able to, good and bad.
According to Equifax, most negative information can stay on your report for between 7 and 10 years. That’s a long time for missed payments to be negatively impacting your score. Just to elaborate, that’s 7 years since you’re last missed payment, not your first. Once you have another strike on your record it starts the ball rolling all over again.
However, it would be unfair to just pay attention to the bad and not the good. The positive effects are kept on your report just as long, with active accounts updating every month and closed paid accounts staying on your file for up to 10 years!
As we have stated on numerous occasions your credit score will not change overnight, improving your credit score is a long process and requires a lot of dedication and consistency. However, there are some changes you can make now to make your journey much easier.
While the majority of factors that make up your credit score rely on looking at a large date range, there are a couple of small changes you can make for a quick positive impact.
The first of which is signing up for the electoral roll, this is because it helps lenders identify you better. The more information you can provide agencies with the easier it will make it for them to make up their mind about you.
Work to pay off any money you have borrowed, with 30% of your credit score being made up of credit utilisation it’s a quick fix to what could be continually hurting your score.
While it may seem odd to add to your available credit, increasing the credit limit on your credit card can work to improve your score overtime (there may be a slight drop or stagnation period, but this will pick up shortly after).
Even though there are immediate changes you can make to your account to see improvements, these ‘quick fixes’ are by no means as effective as the long-term changes you can make to your financial lifestyle.
We already know that 35% of your credit score is based on your credit history and missed payments can stick on your account for 7 years, so making payments both on-time and in full will ensure your score can continue to grow.
Using less than 50% of your available credit can help to show lenders that you’re not overly reliant on borrowing money, only use your credit card for necessities and try to keep the amount you put on low. If this isn’t feasible and you’re consistently over-utilising your credit card, try and make payments twice a month if possible to lower your credit utilisation.
Keeping your accounts open for as long as possible, while only a minute 15% is made up of the length of your credit history, it is a positive factor that can keep ticking away in the background for you. Fortunately, there’s not much you have to worry about here.
With 10% of your report being influenced by your mixture of credit options, it’s important to bear this in mind when investigating your financial situation. If possible try and have different types of credit – credit cards, loans, car leasing for your new brand-new Vauxhall Corsa etc.
Managing your credit score can be exhausting, jumping over hurdle after hurdle without seeing immediate reward. Luckily, there are numerous different options to keep tabs on the improvement of your credit score over time.
Possibly the most popular out there is Experian, allowing you to check your credit score and FICO score. But it doesn’t stop there, Experian provides you with a monthly report summarising the changes, as well as a comparison between your different credit options, credit cards, loans, car insurance, you name it.
Clearscore provides much of the same information and is excellent at telling you what you need to do to bump up your score. The main difference between Experian and Clearscore is where they get their data from, while Clearscore uses Equifax, Experian uses its own metrics as well as information from FICO.
While there are other options such as Totally Money, Money Supermarket, Equifax directly – Experian and Clearscore in tandem highlight exactly what you need to be doing to improve and give you a timeline of your entire credit history.
It can often be difficult to envision what your credit score will look like. What would happen if I paid my loan off in full early? What would happen if I cleared my credit card? What would happen if I took out a lease on a new car? Well now you can.
Credit Karma and MyFICO both offer credit score estimator features that allow you to see what your credit score might look like if certain changes are made. Of course, you can just wait and see the impact, but any prior investigation you can do to make 100% sure couldn’t hurt.
With all the constant changing factors that go into making up your credit score, answering the question: how long does it take to improve your credit score isn’t exactly straightforward.
With negative information sticking around for 7-10 years and the majority of fixes requiring a long-term approach, it’s likely you won’t see the results you want in a few months. It all depends what your credit score is currently and if you have any negative marks on your record.
Even if you’ve never missed a payment, never been in your overdraft, never over-utilised any credit, it still takes time. When you apply for new credit, you’ll see a drop before you see an improvement so just stick with it. Trust us, it’ll be worth it in the end.
We provide car leasing for those with bad credit, with monthly payments that won’t break the bank and the ability to improve your credit score. To take advantage of our range of affordable leasing options, or have a chat with one of our customer service representatives, simply fill out our enquiry form or call us on 0203 823 1010.
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