Your credit score is an important number. It follows you for years and can affect everything from the type of credit card you can open to the type of job you may be hired for to your mortgage rates. Bad credit scores are hard to shake. Can you erase bad credit instantly? Can you fix credit problems immediately when you really need to?
Unfortunately, you cannot erase bad credit instantly. Credit scores are compiled of many different things, and it takes time to transform bad credit into good credit. Let’s look at what a credit score is, and how to build your credit score up.
What is Credit?
Credit is a shorthand for your credit score and history. Your credit history tracks your credit usage, the amount of credit you have, and payment history. So if you have a credit card and a car loan, those are both lines of credit. Each time you make a payment (or miss a payment), it gets reported to the credit bureaus and becomes part of your credit history.
How Credit Scores Work
Credit scores are used to assess how capable and likely you are to make on-time payments on your lines of credit. A low score means you are a high-risk candidate for a loan, and a high score means you’re more dependable.
There are three major credit bureaus in the US: Experian, TransUnion and Equifax. These bureaus determine your credit score through this criteria:
- Payment history: (35 percent) — Your account payments over time, including any delinquencies like late or missed payments.
- Amounts owed: (30 percent) — The total amount of credit you have currently taken out. If you have a mortgage and student loans that total $400,000 in debt, that’s the total amount you owe.
- Length of credit history: (15 percent) — How long you’ve had open accounts and time since account activity.
- Types of credit used: (10 percent) — The mix of accounts you have, such as revolving and installment. Revolving credit is something like credit card debt and installment credit is something like a mortgage.
- New credit: (10 percent) — How often you open new lines of credit, including hard credit pulls and the number of recently opened accounts.
Each category carries a different amount of weight. What lenders are really interested in knowing is if you can pay back what they lend you. So things like your payment history and total credit amounts are big categories that can help they figure that out.
If you have a low credit score and want to erase your bad credit history so that you can secure a new loan, you’re out of luck. Credit scores can improve over a few months, but nothing can erase bad credit instantly.
How to Improve Your Credit Score
How can you make those improvements over time? It’s easier than you may think. Credit scores follow the formula laid out above. If you follow the same formula, you’ll see your score rise.
-Make payments on time. This is crucial to improving your score. If you can get a few months of on-time payments going, your score will definitely rise.
-Refrain from opening more lines of credit. Take six months off from trying to apply for new credit. That means no more student loans, credit cards, or any other type of loan. Letting your account simply stand and not have any more credit pulls will help restore a few points to your score.
-Don’t close any accounts. If you have a credit card that you opened when you were 18, hold onto that account. You can pay off all your credit card debt and still keep the account open. This is a great thing to do, as it shows lenders that you can handle credit over the long-term.
-Use less than your available credit. This means not maxing out your credit cards each month, and not adding to your debt burden any more. Say you have two credit cards with a $7,000 credit limit between the two of them. Try to use 30% or less of your credit to improve your score. This shows lenders that you’re not dependent on credit to live, and you have disposable cash.
You can’t erase bad credit instantly, but you can improve your credit drastically by taking these steps consistently. Bad credit is not forever- the power to change it is in your hands.
Looking for more great articles on how I handle my money? Try these articles:
Why I Have Trouble Spending Money
How I’m Paying Off That $1,200 Credit Card Bill
Kara Perez is the original founder of From Frugal To Free. She is a money expert, speaker and founder of Bravely Go, a feminist financial education company. Her work has been featured on NPR, Business Insider, Forbes, and Elite Daily.
One Reply to “Can You Erase Bad Credit Instantly?”
Excellent breakdown of how your credit score is calculated. As you can see payment history is crucial and there are no quick fixes when it comes to repairing your credit. You need to work away at it to see results and try not to get too discouraged if your score isn’t improving as fast as you would like.