If you have a poor credit score, you’ll likely find it difficult to get approval for a loan request. And if you do get your loan approved, you might get higher interest rates because of the “risk” you bring to the lender. While you can improve your credit score, you might be wondering how much time it might take you. Here’s what factors into how long it takes to improve your credit rating.
Main Factors That Go Into How Long It Takes Your Credit Rating to Improve
There’s no fixed timeframe for how long it takes for your credit rating to improve or reach a desired number. It generally depends on what you’re trying to recover from.
1. Inconsistent Activities
Missing your payments and defaulting on loans are some of the actions that can bring your credit score down. Meanwhile, actions like making on-time payments and finally paying off debts will improve it. If you’re doing both good and bad actions, such as paying off one debt but missing payments in another, your credit score will take longer to rise. This is because you’d be taking two steps forward and one step back.
2. Credit History
Having a low credit score is normal if you’ve just started using credit, as you haven’t done much to improve it. However, this also means you haven’t done anything to lower your score. As long as you don’t miss monthly payments or take on more loans than you can handle, you’ll have a quicker time raising your score.
3. Credit Utilization
Your score will also depend on your credit utilization ratio, which assesses how much debt you have relative to your available credit limits.
You don’t need to have a $0 balance on your accounts to significantly boost your score. In fact, owing a modest sum can be better than owing nothing at all. That’s because when you borrow money and you repay it on time, it shows lenders that you are trustworthy. However, you’ll still need to keep your utilization ratio low—ideally below 30%.
4. Limit Hard Inquiries
Credit inquiries are categorized as either “hard” or “soft.” Checking your credit or allowing a potential employer to do so are examples of soft inquiries that don’t affect your credit score.
But hard inquiries might ruin your credit for months or even years. Hard inquiries occur when you apply for a new credit card, mortgage, or large loan. A few hard inquiries won’t do much. However, having too many in a short period might damage your credit. Banks may perceive you as having financial hardship, making you a high risk. As such, avoid applying for new lines of credit while trying to improve your credit score.
Get a Loan Regardless of Your Credit Score
You don’t have to be concerned with how long it takes to improve your credit rating to qualify for a loan. At Power Finance Texas, we can approve personal loan applications even if you don’t have a stellar credit score yet. Instead, we review other factors like your monthly income and employment status.
To learn more about personal loans and other financial tips, you can check out the rest of our blog. You can also apply for a loan now—approval only takes a few minutes!