How to Rebuild Credit in 5 Steps and How Long It Will Take

Having a low credit score can be frustrating, but there are concrete steps you can take to rebuild your credit. It might take months or years, but stick with the process, and it could get easier as you go. 

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5 steps to help you rebuild your credit score

Rebuilding your credit takes patience as you wait for the impact of negative marks to diminish. But you also want to take action by adding new, positive information to your credit history. Of course, that’s easier said than done, as a financial emergency can lead to a missed bill. But you can always get back on track to keep improving your credit.

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1. Check your credit report

2. Have open and active credit accounts

3. Try to lower your credit utilization ratio

4. Bring accounts current and pay off or settle collections

5. Build your savings

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1. Check your credit report

Late payments, collection accounts, and high credit card balances could hurt your credit scores. But you’ll only know what's happening if you examine your credit reports. 

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Credit reports are the basis for credit scores, and you may have a report with each of the major credit bureaus—Equifax, Experian, and TransUnion. It’s normal for your three reports to have slightly different information. But closely review each one to understand what might be hurting your scores and look for errors, such as incorrectly reported late payments. You can dispute errors for free on the credit bureaus’ websites. 

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To get started, request free credit reports on AnnualCreditReport.com, but they may be overwhelming and hard to understand. Alternatively, get a copy of your credit reports with free accounts from CreditKarma (for Equifax and TransUnion) and Experian. These websites offer easier-to-understand overviews of the specific factors that are helping or hurting your scores. 

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2. Have open and active credit accounts

Your payment history is the most important factor in your FICO and VantageScore credit scores. And if you’re rebuilding your credit, you want on-time loan and credit card payments reported to the credit bureaus.

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Having open installment accounts (such as loans) and revolving accounts (like credit cards) can also add to your credit mix and improve your score. However, if you don’t have a loan, you don’t need to pay interest just to build credit. 

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You can open new credit-building products, like the interest-free Ava Savings Builder, which helps you save money while reporting an installment account and your payments to the bureaus. And use a credit card that doesn’t charge an annual fee. 

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3. Try to lower your credit utilization ratio

Your current credit usage is also an important scoring factor, and it’s one of the only factors that you can quickly improve. 

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Utilization measures the percentage of your revolving credit accounts’ credit limits that you’re using. For example, if your credit card has a $2,500 limit and a $250 balance, its utilization ratio is 10%. 

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A low utilization rate is best for your scores, and most credit scores only consider your most recently reported utilization. If you pay down credit card balances, you may be able to increase your credit scores within one to two months.

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You can also lower your utilization by increasing your available credit. That’s one reason we designed the Ava Card to have a high credit limit. Plus, you can use your Ava Card for subscriptions and automatically pay your bill to build a positive credit history.

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4. Bring accounts current and pay off or settle collections

Missing payments can hurt your credit, and falling further behind can increase the impact. 

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• Technically, credit card companies and lenders can’t report you late until your minimum payment is 30 days past due. If you miss a payment, try to bring the account current right away. 
• Work to bring past-due accounts current by paying off outstanding balances. You could contact your creditors to see if they offer any hardship or repayment options. 
• If you have accounts in collections, paying off or settling the collection accounts may also improve some of your credit scores. 

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A nonprofit credit counselor might be able to help if you're struggling with credit card debt. Counselors can set up a debt management plan (DMP) and negotiate with credit card issuers to try to lower interest rates, waive credit card fees, and bring past-due accounts current. 

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DMPs effectively consolidate your credit card accounts so you only make one monthly payment to the counselor. But you generally can’t open or use credit cards while you’re on a DMP. 

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5. Build your savings

Even with all the knowledge and the best intentions, an unexpected emergency might leave you having to pick and choose between bills. And a late payment can set you back. 

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Establishing and building an emergency fund that you can use to keep up with bills can be an important part of improving your credit. 

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Once you have a good credit score, you also might be able to get a low-rate personal loan or line of credit that you can use to manage your personal finances better. 

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How long will it take to rebuild my credit score?

Consistency and patience can be important for rebuilding your credit. 

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Most negative information, such as late payments and collections, stay on your credit report for up to seven years, even if the account is paid off or closed. However, the impact of negative marks decreases over time, and adding new positive credit information can also help your credit. 

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Your exact timeline for rebuilding will depend on why you have a low credit score and your overall credit profile. But using credit, making on-time payments, and maintaining a low utilization ratio are the three keys to improving your credit over time.  

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Frequently asked questions

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Can I rebuild my credit in three months?

You might be able to rebuild your credit in three months if you have a bad credit score because of a high utilization rate. If you can bring down your overall utilization rate (ideally to under 10%), and don’t have a high utilization rate on any single credit card account, you might see your credit scores quickly rise. 

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How long does it take to rebuild credit from 500 to 700?

The time will depend on what’s impacting your credit and what steps you’re taking to improve your credit. If your accounts are past due, you may need to bring them current and start making on-time payments to improve your credit scores.