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How Long Does It Take to Improve My Credit Score?

Gaurav Pokharel

Feb 15, 2021 7 min read

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How Long Does It Take to Improve My Credit Score
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    Raising your credit score and improving your financial health is like exercising: the results take time, discipline, and consistency. It’s possible to see your credit score improve within one to two months after taking recommended actions. That said, there are several factors that ultimately determine this timeline, including what financial incidents you’re recovering from and what steps you’re taking to recover. You can use Borrowell to check and track your credit score over time.

    Certain financial incidents can have major impacts on your credit score, including missed payments, bankruptcies, and home foreclosures. Recovering from major financial incidents can take at least one year, and sometimes over six years. 

    The recovery steps you take will impact how fast your credit score will improve. Some recovery steps, like bringing your credit utilization rate below 30% and making your bill payments on-time, are more important components for credit score recovery than others.

    Below, we have compiled an outline of the recovery times involved for consumers who want to improve their credit scores while having poor to fair credit (scores between 300 and 659).

    Financial IncidentImpact on Credit ScoreCredit Recovery Time (on average)
    BankruptcyMajor6+ years
    Financial Incident: Bankruptcy
    Impact on Credit Score
    Credit Recovery Time (on average)
    6+ years
    Home ForeclosureMajor3+ years
    Financial Incident: Home Foreclosure
    Impact on Credit Score
    Credit Recovery Time (on average)
    3+ years
    Missed payments/ defaultsMajor18 months
    Financial Incident: Missed payments/ defaults
    Impact on Credit Score
    Credit Recovery Time (on average)
    18 months
    Late payments (30-90 days)Moderate9 months
    Financial Incident: Late payments (30-90 days)
    Impact on Credit Score
    Credit Recovery Time (on average)
    9 months
    Maxing out credit cardModerate3 months
    Financial Incident: Maxing out credit card
    Impact on Credit Score
    Credit Recovery Time (on average)
    3 months
    Closing a credit card accountMinor3 months
    Financial Incident: Closing a credit card account
    Impact on Credit Score
    Credit Recovery Time (on average)
    3 months
    Applying for credit through a loanMinor3 months
    Financial Incident: Applying for credit through a loan
    Impact on Credit Score
    Credit Recovery Time (on average)
    3 months

    Factors that Influence Your Credit Score Improvement Time 

    Your credit score is determined through a unique formula with several different factors. From most to least important, these factors include:

    • Payment history

    • Credit utilization

    • Credit history 

    • Credit mix diversity

    Your payment history is the most heavily weighted factor involved when improving your credit score recovery time, making up around 35% of your overall credit score. For this reason, paying your bills consistently on time is one of the best and easiest ways to improve your credit score. If you have any past due accounts, you should pay off the oldest ones first.

    Credit utilization is another important factor that affects your credit score. It determines around 30% of your overall score. Simply put, your credit utilization is how much credit you have used up compared to the total amount of credit available to you. You should always aim to keep your credit utilization rate below 30%. If you are looking to improve your credit score to buy a house or get a loan, it is important to know how much of your total available credit is being used and to keep it at the lowest amounts possible.

    A key component that can affect your credit score is the age of the oldest account on your report; in this case, the older the better! By keeping older accounts open, you are building your credit history and your total available credit (which plays a role in credit utilization), showing lenders your ability to consistently pay down your debts without missing deadlines.

    Lenders and creditors also like to see that consumers possess a diverse “credit mix.” A “credit mix” refers to the types of credit accounts that a consumer has, whether it is loans, credit cards, or mortgages. Typically, your credit mix will make up around 10% of your overall credit score. There are generally four different types of credit accounts you may find on your credit report: 

    • Revolving credit, such as lines of credit

    • Installment credit, such as personal loans or car loans

    • Open status credit, such as ongoing mobile phone accounts or utilities 

    • Mortgage loans 

    It is not necessarily recommended that you open several new credit accounts just to create a diverse credit mix unless you are planning to use them, especially if you already have bad credit. As credit diversity only makes up around 10% of your overall score, we recommend focusing on more impactful factors, such as improving your payment history and having a balanced credit utilization rate. 

    Your Credit Score Starting Point

    In general, consumers with lower or “bad” credit scores, even those with a credit score of zero, are in a better position to quickly improve their scores compared to those who already have built a healthy credit score and credit history. Credit history accounts for approximately 15% of your credit score and is weighed based on how long your accounts have been open, how long it has been since you have used them, and whether they are still active. Most credit bureaus look for a minimum of six months of responsible credit history to calculate your credit score.

    Building a credit score takes hard work and patience. It takes diligence and won’t happen overnight. However, there are a couple of things that you can do to start improving your credit score if you are in this position:

    • Get a co-signer: A co-signer is someone who has agreed to be responsible if you don’t pay your debt back as agreed. Younger people typically start this way by getting their parents to co-sign a student loan or credit card. Just keep in mind that missed payments with this type of agreement will also impact your co-signer’s credit.

    • Sign up for Borrowell's Credit Builder: Credit Builder is a $240 secured installment loan with a 36-month term. All payments (including missed payments) are reported to Equifax and TransUnion. Positive payments reported to the credit bureaus help you build credit, which is an important factor in qualifying for lower interest rates and better offers on credit cards, mortgages, loans and more. At the end of 36 months, your total savings of $240 will be directly deposited into your bank account.

    • Apply for a secured loan: A secured loan is backed by something you own, like a car. If you have something you can use as collateral, this might be a good option, however, keep in mind that if you don’t honour your payments you may lose that asset. 

    • Apply for a secured credit card: The responsible use of a credit card and managing payments is critical to building a credit score. This means keeping note of your credit utilization (i.e., staying under the limit) and paying your bills on time, every time. A secured credit card can be a great way to build credit history. Secured cards have a few key differences from traditional unsecured cards. Secured cards require a security deposit, and they also have a slightly different qualification process from unsecured cards.

    Your Monthly Financial Habits

    Paying bills consistently and on time shows potential creditors that you are financially responsible and trustworthy, which, over time will help increase your credit score. Although some lenders offer grace periods, it is important to make sure you pay all bills by the due date to avoid potentially being reported to the credit bureau. If you have any past due accounts, you should pay off the oldest ones first.

    To keep track of your bills and ensure timely payment, we suggest:

    • Setting bill payment alerts on your digital calendar to have bill payments top of mind

    • Automating your bill payments to be paid through your bank account or credit card; this will ensure that, if your account has the necessary funds, your bills are taken care of with each of your lenders without having to manually pay them

    Another easy way to keep track of your bills and avoid missed payments is to use Borrowell’s free bill tracking mobile app, available on the App Store and Google Play. Using this app, you can connect your bank account and let Borrowell automatically forecast your upcoming bills.

    Past Negative Info On Your Credit Report

    Your credit report includes financial information about your credit history. Consumers are often concerned about how long information will stay on their credit report and how it will affect their credit score. 

    If you are wondering when something will come off of your report, there are set time frames for items like bankruptcies and collections that Canada’s credit bureaus (Equifax and TransUnion) have put in place. 

    In general, negative information is deleted from your file 7 years from the date of last activity. Some negative information can remain on your credit report for longer than  others.

    Best Ways to Improve Your Credit Score

    Credit score improvement is a key priority for many consumers on their financial journey. Here at Borrowell, we understand the importance of being informed about the tangible steps needed to make impactful financial changes. As a summary, there are 8 key steps you can take to immediately improve your credit:

    • Pay Your Bills On Time

    • Keep Your Credit Utilization Low

    • Take an Offer to Raise Your Credit Limit

    • Be Cautious When Seeking Additional Credit

    • Diversify Your Credit Mix

    • Dispute Errors on Your Credit Report

    • Keep your Oldest Credit Card

    • Consider a Secured Credit Card

    As we often mention, the quickest way to improve your credit score, sometimes in as little as 30 days, is by paying your bills on time and using less than your available credit limit. These actions, when done consistently, may improve your score by as many as 100 points. 

    It is also important to note that your payment behaviour is reported to credit bureaus every 30 days; by taking consistent steps towards making timely payments and staying within your credit budget, you will be able to, slowly but surely, improve your credit score. To keep tabs on how your positive habits are helping your credit score improve, sign up for Borrowell to check and monitor your credit score for free.

    Gaurav Pokharel
    Gaurav Pokharel

    Gaurav is a senior communications consultant in the executive recruitment industry, focusing on financial services. He enjoys creating educational content related to credit health and personal finances for Borrowell. Gaurav has a passion for conveying complex messages in an impactful way, and graduated with Honours from the University of Waterloo with a degree in Rhetoric and Professional Writing.

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