A credit score rates a consumer’s creditworthiness. It is generally between 300-850, with a higher score indicating better trustworthiness to lenders. This score is based on people’s credit history, including the number of open accounts, total debt levels, repayment history, and other factors. A low credit score can lead to difficulty in getting a loan or higher interest rates. This model was developed by FICO and is used by financial institutions countrywide. Read on to learn more.

While creditors may have their own rankings, companies generally use the following FICO score range to judge creditworthiness:
Excellent: 800-850
Very Good: 740-799
Good: 670-739
Fair: 580-669
Poor: 300-579

As information continues to be changed about your financial actions, such as new loans or payment of credit card bills, this report continues to be updated. If you are dealing with a poor credit report, here are six steps you can take for credit score recovery:

Fix or dispute any errors
Credit bureaus may make mistakes sometimes. A study by the Federal Trade Commission reported that about a quarter of people noticed errors on their credit reports. Having these reports fixed can help improve your scores, so make sure that you check your credit score once a month to look for errors and report them immediately.

Pay the bills on time
Timely payments make up 35% of your credit score, so make sure that you keep up with them! One way of ensuring that all your bills are paid on time is by setting up autopay. If a service does not allow automatic payments, try to pay the bill as soon as you receive it or work out a payment plan. Setting up a monthly budget and abiding by it can help you stay on top of all your bills and payments.

Pay off debts
Paying off old outstanding debts can help you improve your credit score in the long run. Experts recommend using either the avalanche or the snowball method to pay back your credit card debts. The avalanche method focuses on paying off high-interest credit cards first, while the snowball method starts with repaying the smallest balances. Pick the most suitable payment method to begin loan repayment based on your financial situation.

Increase your credit line
Call and inquire about a credit increase for your existing credit cards. For those who have a decent history of payments, these increases are easy to get. Ensure that you do not spend this extra limit. Aim to keep a credit utilization ratio between 0% and 30%, as this indicates well-managed finances.

However, minor scoring factors may also negatively impact your credit score. Make sure you limit these credit applications, as too many hard inquiries can further drop your credit score. Opening a new account may also temporarily lead to a small drop in credit scores, as it decreases the average age of your accounts.

Keep old credit cards open
Even if you are not using your old credit cards, don’t close them. They can help add value to your credit line and keep your credit utilization ratio low. Closing the account, however, may bring down your credit score.

Work with a credit repair company
If you have a little extra money but do not have the time to fix your credit score, hire a credit repair company. For a small cost, they can help you negotiate with creditors and agencies and dispute errors faster to improve your overall score. This is a small price to pay for an improved credit score, which can significantly bring down interest rates and provide other opportunities.

Following these tips and ideas can help you improve your credit score over time. But how long does improving your credit score take?

Unfortunately, there is no set timeline for how long it takes to reestablish credit. It entirely depends on why your scores are low and the steps you can practically take to rebuild them. In case of a single missed payment, credit scores can be improved in a shorter period of time. For those who default on multiple payments over time, it is likely to take longer to recover the credit score. However, most negative remarks stop impacting your credit scores after seven years. Chapter 7 bankruptcies may stay on for ten years.

Once you take steps to reestablish your credit score, make sure that you check it regularly, and keep tabs on the reports. Monthly checks can help you identify the trends in your credit score and keep a closer eye on any errors that may need to be corrected.