According to data reported by credit reporting agency Experian, the average consumer debt balance in 2024 was $105,056, part of the overall rise in U.S. consumer debt, which totaled $17.57 trillion. That’s a significant chunk of change, and how an individual handles their debts and repayments has major impacts on their credit scores.
From Consumer Affairs, a journal of consumer research:
Credit score simulations from FICO, the most widely used credit score provider, indicate that a credit payment reported as overdue by 90 days or more can reduce a credit score by up to 133 points and lower a consumer’s FICO rating from “Very Good” to “Fair,” a drop of two levels.
If you are someone who has seen their credit score take a hit, it may feel like an insurmountable obstacle to repair and rebuild it, but if you have the dedication and will power, it’s fully possible.
What Does Rebuilding or Repairing Credit Mean?
Let’s start with the bare basics: your credit score.
In broad terms, your credit score is a number used by lenders to get an idea of your trustworthiness and integrity when it comes to debt and loans and helps them decide on whether they’re comfortable extending you credit or not. There is more than one way to calculate this number, though people are probably most familiar with the FICO Score, which gives you a credit score number between 300 and 850.
The higher your score, the better your credit:
- Excellent: 800–850
- Very Good: 740–799
- Good: 670–739
- Fair: 580–669
- Poor: 300–579
For better or worse, this score has an effect on so much of your financial life. It can impact what loans you get approved for, your credit card limit, the interest rates you’re offered, the mortgage and rental options you have, and more.
Like we mentioned in that quote from Consumer Affairs above, a single overdue credit payment can drop your credit score by over 100 points – a huge issue for anyone interested in creating a better financial future for themself. Credit repair is the process of taking steps toward improving your score by:
- Combing through your report for any errors
- Addressing negative items like late payments
- Paying down on your current debts
- Improving your spending and financial habits
What Can Impact Your Credit?
Each of the three major credit bureaus – Experian, Equifax, and TransUnion – calculates credit scores a little differently, but they do agree with the five main factors and how they are prioritized in calculations.
These factors are:
- Payment history (FICO: 35%) – Often the biggest factor, this encompasses a full record of any debt payments and any late or missing payments
- Current debts or amounts owed (FICO: 30%) – This isn’t just the total amount of debt you have, but also your credit utilization ration, aka, how much debt relative to your initial loan
- The length of your credit history (FICO: 15%) – In this case, the older the better, especially if you have managed your credit accounts well in the past
- Credit mix (FICO: 10%) – More experience with different types of credit (auto, mortgage, student, credit card, etc.) equates to a better score
- New and recent credit (FICO: 10%) – Includes how many new accounts you have open and how many hard credit inquiries you have
Any financial action that has a negative effect on your credit score is referred to as a “derogatory mark,” but having derogatory marks on your report doesn’t mean you can’t repair your credit. The key is collecting as much information as you can and then practicing patience.
How Long Does It Take to Rebuild Your Credit?
The simplest answer here, unfortunately, is: it depends. But it’s likely going to take some diligence to stick to your goal. One of the reasons for this is that derogatory marks can stay on your credit report for years.
- Hard credit inquiries: 2 years
- Late and missed payments: 7 years
- Collection accounts: 7 years
- Chapter 13 bankruptcy: 7 years
- Chapter 7 bankruptcy: 10 years
You can and should still make moves to repair your credit, even with derogatory marks on your record, but just be aware that they will still have an impact.
Beyond that, the exact length it will take to dig out of a credit score hole depends on how many and how major the issues on your report are. The more numerous and severe, the longer it will take. Credit Recovery Group estimates that simple cases can be resolved in one or two months, moderate cases resolved in 3-6 months, and complex cases resolved in six months to a year or more.
Tax preparation and consulting firm TaxUSA offers similar estimates:
- 30-45 days to dispute an error on your report
- 1-3 months after fully paying off a past-due account
- 1-2 months after reducing your credit utilization ratio
- 6-12 months of establishing a positive credit history
Some of these factors take an investment in long-term, gradual changes in your financial habits. Your credit utilization ratio, for example – you can reduce it by paying off your purchases the same day, making multiple credit card payments in a month, asking for a credit limit increase (but not increasing your spending), and using more than one credit card. Month to month, demonstrating that you can pay off your bills, meet payment deadlines, and chip away at your debts will gradually push your score in a positive direction.
Can You Speed Up the Credit Repair Process?
There are a lot of elements of the credit repair process that you can’t control. You can’t make credit agencies and bureaus move faster in their reviews of disputes or get your credit utilization ratio to update quicker. But there are a few things you can do to help smooth the way:
- Have your paperwork ready. This includes pulling credit reports from all three of those major bureaus, as well as any supporting documentation.
- Be aware of common errors that might appear on your credit report, including incorrect identity information, accounts with similar named owners, identity theft, repeat listings of the same debt, and incorrect credit limits.
- Consider working with an agency like the National Foundation for Credit Counseling to create a debt management plan that could give you a structured path to better credit and less debt.
Repairing Your Credit Rating Is Possible
It’s difficult enough worrying about making ends meet every month; having issues that are lowering your credit score can be a weight, making financial progress even more difficult. But credit repair is not impossible, and you can take actions today to get started. Get familiar with your credit reports, work with trusted lenders like WithU Loans to start paying off any outstanding or predatory debts, and reshape your financial future.
