There’s no sugarcoating it: Going through foreclosure, bankruptcy or debt collection is unpleasant. When going through financial problems, it may seem like things are far from getting better, including your credit score, but having a few bad marks on your credit history doesn’t mean you’ll never bounce back. Eventually, negative items will age off your credit report, and you don’t have to wait for a clean slate to rebuild your credit standing.
“I understand seven or 10 years feels like a very long time, and it is, but keep in mind there is a light at the end of the tunnel,” said Gerri Detweiler, Credit.com’s director of consumer education. “You can start seeing improvements soon, if you start really working on it, in most cases.”
Bad Credit Doesn’t Last Forever
Most negative information stays on your credit report for seven years (bankruptcy may remain on your report for up to 10 years), and depending on what the tradeline is, its effect on your credit may diminish even sooner.
For example: After a year, a late payment won’t hurt your credit score as much as it did when it first showed up on your credit report. Another year goes by, and it matters even less. On the other hand, things like debts in collection, foreclosure and bankruptcy are considered more serious indicators of risk, said Anthony Sprauve, senior consumer credit specialist at FICO.
“What it means is it’s going to take them longer to rebuild their score, but they can absolutely rebuild it,” Sprauve said. “That’s the point we try to make with people: Even the worst financial missteps you can recover from in a reasonable amount of time, if you begin to practice the basics of good credit management.”
How to Bounce Back From Bad Credit
Even with some of the most damaging records on your credit reports, you can make improvements to your credit scores by making loan payments on time, keeping your credit card balances low and applying sparingly for new credit. You’re not forced to sit on the sidelines just because you’re going to have a piece of negative information on your credit report for several years. You can get two of your credit scores for free on Credit.com and monitor your progress as you rebuild your credit.
Keep in mind not all negative informations ages off: Unpaid judgments and unpaid tax liens have the potential to stay on your credit reports indefinitely, Detweiler noted, so if you’re dealing with either of those things, do what you can to take care of them.
On top of that, remember your credit score isn’t the only thing lenders consider when reviewing you as a potential borrower.
“While the score is a very important part of getting credit, loan officers look at a variety of other things,” Sprauve said. He also emphasized the importance of patience when trying to recover from financial setbacks. “I always want people to feel optimistic. … It will take time, but they can rebuild their credit.”
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