How long does It take for bad credit to disappear from your credit report?
When life gives you lemons, you are supposed to make lemonade but many people will tell you that things are not that simple and it can take more than lemons to make bad credit disappear.
Having perfect credit is a challenge that most times is out of our control. When you are in need of money and have no choice but to get it from unconventional sources such as high-interest credit cards, you become financially stressed and desperate and before you know it it has spiraled into a never-ending challenge in trying to obtain good credit and becoming debt-free. It’s a case of the dog chasing its own tail. Some people have no choice but to carry high debts due to their life circumstances and financial situation. It is often difficult to have good credit when you are only making the minimum payments on your credit card and carry a high debt balance. Having a high credit utilization means spending more than 30% of your credit limit, which will decrease your credit bureau scores. Credit bureaus such as Equifax or TransUnion keep records of late and missed payments, outstanding debts and reports from collection agencies. Credit bureaus also keep records of bankruptcies and consumer proposals. These reports can linger on your file for a number of years depending on the reported debt. Before you attempt to apply for a mortgage or any type of loan, it is best advised to clear up any outstanding balances or debts that are showing on your credit report. Old student loans such as the Ontario student assistance program (Osap) might be showing as collections if unpaid.
In instances where you have cleared up old collections or unpaid balances, there is a possibility that these debts are still showing on your credit report. All you need to do is get in touch with the credit bureau and prove to them that you have paid your debts in full. Most cases do not require you to gather proof that you may no longer have access to and a simple phone call can usually solve your problem.
Here is a simple guide on how long unpaid debts and delinquencies will stay on your credit report:
Bringing your credit back up to optimal scores is not that difficult, and can be achieved with a little bit of time and vigilance.
Keep track of your spending and only spend what you can payback. Keeping a low credit utilization can serve you well and increase your credit score rapidly.
Spend no more than 30% of your credit limit, which means if you have a 3,000-dollar limit, you would only want to use 900 dollars maximum.
Credit bureaus take a monthly snapshot of your spending habits and patterns. If you are always maxing out your credit cards and only paying the minimum payments, you will be perceived as a riskier borrower than someone who uses less than 30% of their credit limit. This is an important factor when trying to increase credit scores. Other things you can do to help your scores rise quickly are to never carry a balance for longer than 48 hours. If you only spend money you can pay back right away, you will reach your desired credit score fairly quickly.