How Long Does It Take to Improve My Credit Score?

It only takes a few months to destroy a good credit history, but it takes much longer to rebuild it. The answer to today's question is "it depends". One tool that will help rebuild credit is to monitor it closely using a service like Identity Lookout. Belive it or not, in some situations, it may make sense to NOT pay off a debt since it could cause more harm than good to the overall credit profile.

Credit scoring is far from cut and dry. The formula considers up to 50 variables, each with a different weighting. More than 1/3 of a credit score is based on the last 24 month payment history, with heavier statistical weighting given to the most recent 12 months. If your credit score is 600 and you pay off the remaining $7,000 of your auto loan or lease, do not expect an overnight jump in your score for these reasons:

1) Some creditors take up to 2-3 months to report payment history to the credit bureaus.

2) If you had one or more 30 day delinquencies within the past 24 months that could hold your score down more than the payoff brings it up.

3) About 1/3 of a score is tied to the ratio of debt owed to available credit. If the $7,000 payoff on that car loan represented a small percentage of your overall debt load then the impact on the score will be mitigated.

Projecting the impact on a credit score by a specific action like a payoff can only be done in context of your overall credit profile. Make sure you have constant access to changes in your credit profile by subscribing to a real-time monitoring service like Identity Lookout.