How Buyers Can Instantly Improve Their Credit Scores
February 26, 2020
The higher your credit score, the better your chance to snag a lower mortgage rate and potentially save tens of thousands of dollars over the life of a loan. But one missed payment or a default can instantly bring a credit score down.
“Depending on your credit history, a 15- or 20-point shift could mean the difference between being approved or declined or better terms or higher costs,” Rod Griffin, the director of public education at Experian, told CNBC.
The top way to increase your credit score: Pay your bills on time and reduce your credit card balance. That habit alone can improve a score as quickly as within a few billing cycles.
“As a rule of thumb, you could see an appreciable difference in six months,” Ted Rossman, an industry analyst at CreditCards.com, told CNBC. However, “if a missed payment has dragged your score down, your score could rebound in a month or two; a series of late payments will take longer to make a full recovery,” Griffin adds.
The recovery for a late mortgage payment can take about nine months for a credit score to recover. Filing for bankruptcy could take up to five to 10 years.
The overall credit history of the borrower plays a significant role in how fast they can recover from financial mishaps, Griffin told CNBC. But “the better your scores are to start with, the more difficult it is to improve them,” he adds. A lower credit score reflects a pattern of missed payments so adding one more missed payment isn’t as significant. But a person with a clean credit report who misses a payment will see a bigger impact, Miron Lulic, founder and CEO of SuperMoney, told CNBC.
However, the goal needn’t be a perfect score, but “the goal is to have a score that qualifies you for the best terms of rates, generally 750 or above,” Griffin says.
Overall, credit scores recently have been at an all-time high, according to FICO. FICO credit scores range from 300 to 850.
Updated: April 09, 2021