Rebuilding your credit can take anywhere from three months to seven years. The specific length of time will depend on what lowered your credit in the first place.
A good credit score makes it possible to borrow money for large purchases, like a home or car. It also ensures you can live in safe areas as you’re more likely to get approved for the best apartments and rental properties.
One unfortunate circumstance can lead to credit issues. For example, you miss a mortgage payment or lose your job and need to max out your credit cards for several months to make ends meet.
If you’re wondering how long it takes to rebuild credit, the answer depends on how low your credit is and what caused the change. You can make incremental changes in a few months, but large changes can take several years. Benzinga’s experts provide detailed insights into rebuilding your credit after various credit impacts.
How Long Does It Take to Rebuild a Credit Rating?
Rebuilding credit takes time and attention to on-time payments, maintaining a low credit utilization ratio, and avoiding opening new accounts. Here’s a look at the estimated time to rebuild credit after negative credit events.
| Event | Time to Rebuild Credit |
| Maxing out a credit card | Three months |
| Applying for a new credit card | Three months |
| Closing a credit card account | Three months |
| Late mortgage payment | Nine months |
| Defaulted payment | 1.5 years |
| Foreclosure | Three years |
| Bankruptcy | Seven or more years |
Maxing Out a Credit Card
Just because you have a large line of credit with your credit card does not mean you should use it all. Ideally, you want to keep your credit utilization below 30% for the best credit. If you max out your credit card, it will put you over the suggested credit utilization.
It takes approximately three months to see improvements if you’ve maxed out a credit card.
Applying for a New Credit Card
Applying for a new credit card or any line of credit requires the creditor to complete a hard credit inquiry. Hard inquiries can stay on your credit report for up to two years. But thankfully, you won’t see credit score impacts for that long.
When shopping for a credit card or loan, try only applying if you’re confident this is the right financial tool. That way, you avoid multiple hard inquiries about one purchase or new credit card. Do your best to stretch out when you have hard inquiries on your account to avoid their impact all at once. That way, your credit has a chance to rebound between inquiries.
Closing a Credit Card Account
Credit age is another crucial factor in your credit score. When you close accounts, it impacts your credit age. And if you close a credit card, it also lowers your total available credit, impacting your credit utilization ratio.
Closing old accounts should only impact your credit score for a few months if you adjust your spending and keep your credit utilization ratio low. If you’re paying fees on the credit card, it’s still wise to close the account. Another reason to close an unused credit card account is if you don’t monitor it regularly, you could become a victim of fraud.
Late Mortgage Payment
If your mortgage payment is 30 days late or more, your lender will report it to the major credit bureaus. Not only that, but a missed mortgage payment can increase the total cost of the loan over time.
The best way to get your credit back on track after a late mortgage is to make on-time payments moving forward. This shows you are a reliable borrower.
Defaulted Payment
Your payment history is the most important factor in your credit score. Missing a payment not only means you could be liable for late fees, but you’ll also see large impacts on your credit score.
The best move is to pay when you realize you missed it. That way, it will have minimal impacts and you might be able to pay it off during a grace period that many creditors provide.
If you can’t pay, contact the creditor to learn your options. If you've fallen on hard times, you might be able to defer the payment or find other relief options.
Foreclosure
After 30 days of a missed mortgage payment, you’ll default. Within 90 days, most lenders will start the pre-foreclosure process. Most lenders will foreclose on your home within 120 days.
Once the legal process is completed, you’ll see a sharp decline in your credit score. That will take several years of on-time payments and responsible credit use to recover from. Lenders will be leery of lending you money after such an event.
Bankruptcy
Bankruptcy filings remain on your credit report for 7-10 years. But if you diligently manage your credit wisely, you can start seeing positive changes within a few years. And within seven years, you might be able to open a new line of credit, such as a mortgage or an unsecured credit card.
How Long Does Negative Information Stay on Your Credit Report?
The amount of time negative information stays on your credit report will vary. Many actions last 7-10 years. Here’s a look at the duration certain negative events can have on your credit score.
- Hard credit inquiries: two years
- Missed payments: seven years
- Late payments: seven years
- Collection accounts: seven years
- Chapter 13 bankruptcy: seven years
- Chapter seven bankruptcy: 10 years
5 Steps Toward Rebuilding Your Credit
When you’re ready to do a credit rebuild, follow these steps.
1. Make On-time Payments
On-time payments are the most important element in your credit score. Late or missed payments will seriously harm your credit and take longer to overcome than other minor infractions.
2. Maintain a 30% or Less Credit Utilization Ratio
Lenders want to know you can handle a line of credit. Keeping your credit utilization ratio below 30% will help prove you can use credit wisely.
3. Avoid Closing Old Accounts
Keep it open unless you have a reason to close an old account. This will help you maintain your credit history, an important factor in your credit score.
4. Use a Secured Credit Card to Show Trustworthiness
Consider opening a secured credit card if hard times have led you to bad credit. Once you show your trustworthiness, you can transition to an unsecured card, which will help you grow your credit. You will need a few hundred dollars for the card, as that opens your line of credit with the issuer.
5. Use a Credit Builder Loan
Taking out a personal loan can help you build your credit as you show you can manage debt. Consider a bad credit loan on which you can easily pay monthly. Be sure you don’t overextend yourself with the loan.
Recover Your Credit Score After Negative Events
After negative events impact your credit score, you might feel like you’ll never rebound. Know that with time, your credit will start to recover if you’re managing your finances wisely. On-time payments and a credit utilization ratio of 30% or less are the two factors you can control that will have the largest impact on recovering your credit after negative impacts.
Frequently Asked Questions
How fast can you rebuild your credit score?
You can see improvements in your credit score within a few months. However, major changes, such as responsible financial decisions, will take 12 months.
How long does it take to rebuild credit from 500 to 700?
How long it takes to rebuild credit from 500 to 700 will depend on what caused your credit to fall. But it takes 12-24 months of responsible money management in most cases to see that much of a credit score change.
Is it true that after seven years, your credit is clear?
If you filed for bankruptcy, seven years later, the negative impacts will begin to fall off your account, though it can take as many as 10 years to see changes.
About Rebekah Brately
Rebekah Brately is an investment writer passionate about helping people learn more about how to grow their wealth. She has more than 12 years of writing experience, focused on technology, travel, family and finance. Her work has been published in Benzinga, Hearst Bay Area, FreightWaves and Dallas Observer publications.