Recovering From a Big Hit to Your Credit Score -- How Long Does It Take?

While it takes years of diligence to attain an excellent credit score, it only takes one financial misstep to bring it down. And once that happens, you're at a severe disadvantage in life, as a bad or even average credit score makes it harder to get approved for loans, credit cards, and anything else that requires a credit check.

If your credit score has suffered a big drop recently, you're probably curious when it will bounce back. Most negative events remain on your credit report for seven to 10 years, but that doesn't mean they'll affect your score for that long. Although your unique financial history plays a role and makes it impossible to predict exactly when events stop counting against you, there are typical recovery time frames for each issue.

Missing a payment

As payment history is the most important factor in determining your credit score, even one missed payment can take your score down by over 100 points (the higher your score, the bigger the hit). Missed payments start counting against you once they're at least 30 days late, and the longer it takes you to catch up, the greater the impact.

These usually stay on your credit report for seven years, although they can drop off sooner. If you get your account back in good standing and avoid missing any more payments, your score should recover within one to two years.

Defaulting on a loan or credit card

Defaulting on either a loan or a credit card puts you in all kinds of trouble. The creditor will report your missed payments to the credit bureaus and may send your account to a collection agency, which can slash your score by over 100 points. It's even worse if you default on a mortgage and the lender forecloses on your home, as your score can drop 160 points.

Like missed payments, defaults stay on your credit report for seven years. It could be three to seven years before your score fully recovers, especially if you had a mortgage default and a foreclosure.

Maxing out a credit card

Even though maxing out a credit card sounds bad, it's not a problem in and of itself. The real problem is what it can do to your credit utilization ratio, which is responsible for 30% of your credit score.

If you have one credit card and max it out, then you're at 100% credit utilization, and your score will go down. But let's say you have two credit cards, one with a $500 credit limit that's maxed out and one with a $4,500 limit that has no balance. Although one card is maxed out, you'd only be at a 10% utilization ratio, and your credit score would be fine.

The far more likely scenario, of course, is that maxing out a credit card would bring your credit utilization ratio far above the recommended limit of 30%, which would ding your credit score. In that case, you can repair your score in a matter of months by paying down your balances.

Declaring bankruptcy

Bankruptcy is the single most severe credit score damager, potentially wiping 240 points off your score. A Chapter 13 bankruptcy, which eliminates a portion of your debt but requires you to commit to a payment plan for the rest, stays on your credit report for seven years. A Chapter 7 bankruptcy, which eliminates most unsecured debt entirely, stays on your credit report for 10 years.

Unlike lesser issues, a bankruptcy isn't something your credit can recover from in a year or two. If you had a score of around 680 before the bankruptcy, you're looking at five years to get it back. If you had a score of 720 or above, it could take the full seven to 10 years.

When you're rebuilding your credit, remember that the time frames above are for a complete recovery. Your score will gradually increase as negative events fade further into the past. What's important is staying on track by paying everything on time, keeping credit utilization low, and avoiding any more mishaps.

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