Time heals all wounds when it comes to credit

Time heals all wounds when it comes to creditTime heals all wounds, or so the saying goes. This might be cold comfort if you're dealing with a breakup or career setback, but it's a helpful attitude to adopt with your credit.(Photo: Thinkstock)Time heals all wounds, or so the saying goes. This might be cold comfort if you’re dealing with a breakup or career setback, but it’s a helpful attitude to adopt with your credit. If you’ve recently experienced a financial hardship or made a serious credit mistake, letting time pass is one of the most effective strategies for repairing the damage. But how long will it take for your score to bounce back, and what can you do in the meantime to help it along? Let’s take a look.Just how long do black marks stick around?First, the bad news: Most black marks will stay on your credit report for seven years. Examples of events that stick around for this length of time include:Delinquencies
Defaults
Charge-offs
Collections
ForeclosuresNote: Certain other derogatory marks, such as an unpaid tax lien or a bankruptcy, will remain on your report for up to 10 years. To understand why this matters, it’s important to remember the relationship between your credit report and your credit score. The information on your credit report is used to create your credit score. Positive actions, like paying bills on time and keeping the balances on your credit cards low, will drive your credit score up. On the other hand, if you make one of the mistakes listed above, your credit score will drop. Since your credit score is one of the primary data points used by banks to determine whether or not to extend you credit, this will make it difficult to get a loan on good terms for quite a while.The effect of a mistake on your score will lessen over timeYou might be thinking that waiting seven to 10 years for your credit score to rebound from one mess-up is a pretty long time. But just because an event is on your credit report doesn’t mean that it will have a consistently damaging impact on your score until it drops off. In fact, the effect of a negative mark will substantially lessen over time. “The impact of any credit event on a person’s FICO score is strongest when it initially happens,” says Anthony Sprauve, senior consumer credit specialist at FICO, which is responsible for creating the most widely used credit scoring algorithm in the U.S. “Current behavior carries more weight than past behavior.”So let’s say you were 60 days late on paying one of your bills and a delinquency now appears on your credit report. You should expect to see an immediate, sharp drop in your FICO score, and the mark will remain on your credit report for seven years. But as time goes by, your score will improve because new information will be accruing and making the old mark less significant.“As those [credit] events – negative or positive – fade in the rearview mirror with time and distance, they have less impact on the FICO score,” Sprauve says. “The most current information has greater impact on the score calculation.” But you still need to be proactive to bounce back from a credit misstepIt’s a big relief that a negative mark on your credit report will have a limited-time effect on your credit score. But to ensure that it bounces back, you’ll need to take active, positive steps moving forward. If you continue to make mistakes, your credit will continue to suffer. Specifically, you should be sure to:Pay your all your bills on time – no exceptions.
• Don’t exceed 30% of the available credit on any of your credit cards at any point during the month.
• Apply for new credit sparingly.
• Keep using your credit cards consistently and responsibly.
• Review your three credit reports at least once per year for accuracy.Remember, you’re empowered to improve your score no matter how bad your credit is currently looking – take these tips and make the most of them!More: All I Want for Christmas Is a Good Credit Score
More: 3 Credit Card Mistakes to Avoid in Your 30s
More: 4 Warning Signs You’re Headed for Credit Card TroubleNerdWalletis aUSA TODAYcontent partner providing general news, commentary and coverage from around the Web. Its content is produced independently ofUSA TODAY.

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