How To Rebuild Your Credit Score?

Learn how you can accelerate your credit rebuilding with Bajaj Finserv Credit Pass.
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2 min read
20 July 2023

One of the most pressing questions in the world of personal finance is “how long does it take to rebuild credit?” Your credit score, often referred to as the CIBIL Score, plays a significant role in your financial life. It influences your ability to get loans and credit cards. However, life can be unpredictable, and circumstances may lead to a drop in your credit score. The good news is that with diligence and smart financial practices, you can rebuild your credit. But how long does it take to achieve this goal? Let us explore!

Understanding the credit rebuilding process

The process of rebuilding credit is not an overnight miracle. It requires patience, discipline, and strategic financial planning. Credit scores are calculated based on factors such as payment history, credit utilisation, length of credit history, new credit accounts, and credit mix. Each of these elements contributes to the overall score, so improving them is crucial.

1. Payment history: Timely repayment of bills and loans has the most significant impact on your credit score. Consistently paying your dues on time shows responsible financial behaviour, which lenders appreciate. It may take a few months of on-time payments to witness improvements in your score.

2. Credit utilisation: This factor considers how much credit you are using compared to your credit limits. Keeping your credit utilisation below 30% is advisable. Lowering this ratio can positively impact your score, but it may take a few months to reflect the change.

3. Length of credit history: The longer you have a credit history, the better it reflects your creditworthiness. If you have a limited credit history, rebuilding credit could take longer.

4. New credit accounts: Opening multiple new credit accounts in a short span can negatively affect your score. The number of hard inquiries made by lenders can impact your credit score temporarily.

5. Credit mix: Having a mix of different types of credit, such as credit cards, secured home or car loans, and collateral-free personal loans, can positively influence your score. However, avoid taking on new credit just for the sake of diversification.

Rebuilding timeline

Now that we understand the factors that influence credit scores, let us talk about timelines. Keep in mind that individual situations vary, and there is no one-size-fits-all answer. Generally, it takes about 6 to 12 months of consistent, responsible financial behaviour to see significant improvements in your credit score.

During the first few months, concentrate on making all payments on time and reducing outstanding debts. Avoid applying for new credit until your score shows signs of improvement. As time passes, your responsible credit behaviour will have a positive cumulative effect on your score.

Tips to accelerate credit rebuilding

While waiting for your credit score to improve, you can take additional steps to speed up the process:

  • Check your credit report: Regularly monitor your credit report for errors or inaccuracies. Dispute any discrepancies you find with the relevant credit bureau.

  • Pay off debt strategically: Focus on paying off high-interest debts first while making at least the minimum payments on other debts.

  • Automate payments: Set up automatic bill payments to avoid missing due dates accidentally.

  • Use secured credit cards: Consider using secured credit cards responsibly. These cards require a cash deposit as collateral and can be an effective tool to rebuild credit.

  • Keep old accounts open: Closing old accounts can shorten your credit history. Keep them open, even if you do not actively use them.

Rebuilding credit might seem like a daunting task, but you do not have to navigate this journey alone. Bajaj Finserv Credit Pass is a fantastic tool to help you rebuild your credit score. With this unique offering, Bajaj Finserv provides you with a complete overview of all your credit accounts in one place, allowing you to monitor upcoming deadlines and factors that influence your score. It offers valuable real-time insights into your credit health and interactive tools that you can use to plan your finances. Leveraging the Credit Pass can significantly hasten the process of rebuilding your credit and positively transform your credit score.

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Frequently asked questions

How can I rebuild my credit score quickly?

While there is no quick way to restore your credit score, there are steps you may take to expedite the process. Make on-time payments, reduce your credit usage, and keep an eye out for mistakes on your credit report. Consider secured credit cards and bill payment automation. With perseverance and careful financial planning, you might see an improvement in your score in as little as six to twelve months.

Can credit score be rebuilt?

Yes, credit scores may be repaired through hard work and prudent financial management. Improve factors such as payment history, credit usage, credit history duration, new credit accounts, and credit mix. Implementing proper credit habits for at least six to twelve months can enhance your score dramatically.

How do I get my credit score up 100 points in one month?

It is extremely unlikely that you will improve your credit score by 100 points in one month. Credit restoration is a continuous process that necessitates consistent, appropriate financial activity over time. Make on-time payments, reduce existing debts, watch your credit record, and avoid new credit. Implementing these steps may result in an increase in your credit score within a few months.