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How Much Can Removing One Negative Item Raise Your Credit Score?


Having a good credit score is important, whether you're looking to finance a new home or simply get better terms on a new credit card. But sometimes your past spending habits can hold you back.

If you're working to get a better credit score, you likely expect that removing a negative item from your credit report will cause your credit score to go up. That's a smart assumption, but the question is, How much will it increase?

"It all depends on what the negative item was," Jorie Johnson, a financial planner with Financial Futures in New Jersey, said in an email. "Typically, it takes seven years after removing a negative item for it to be 100% removed from affecting your credit score."

What Affects Your Credit Score

Items that are particularly damaging to your credit score include bankruptcy, tax liens, accounts that have gone to collections and foreclosures. You'll likely see a substantial increase in your score when these items age. A smaller problem, like a late or missed payment, will still negatively affect your score, but there are worse things to have on your credit report and its impact will diminish over time, especially if it was a one-time thing.

Whenever an item ages off your credit report, you may see an improvement in your score. But keep in mind that the amount at which it improves will vary based on what else is on your credit report — someone with an otherwise pristine report will likely see a larger increase when that item comes off the report than someone who has several blemishes in his history that still need to be dealt with.

Repairing Your Credit

Whether it's paying off debts or getting fraudulent charges removed from your credit report, there are several problems to address that can help you improve your credit score. The first step is to review your credit report to see where the problems are. (You can get a free credit report each year from AnnualCreditReport.com.)

Once you've identified the problem areas, it's time to take action. The three major credit reporting agencies — Experian, Equifax, and TransUnion — have a dispute process in place to help you report any clerical errors or other mistakes you discover, like fraud. Even late payments that were mistakenly reported can cause your score to drop, so it's important to dispute anything that's incorrect. You can only dispute inaccurate information, but that doesn't mean you can't negotiate with creditors about what they report to the bureaus. You never know what a creditor may be willing to do unless you ask.

Building Your Credit

Once you've taken care of any problems, try to maintain good habits to help build your credit.

"The best way to build your credit score is to have credit issued in your name, to use it monthly and to pay it on time," Johnson said. "If you have a credit card, every few months you should call to get the credit amount allowed increased. It is all about ratios: available credit to used, or outstanding, credit."

Keep in mind, increasing your credit limit doesn't mean you should spend more. Many financial and credit experts recommend keeping credit card balances at less than 30%, and ideally at less than 10%, of the credit limit to boost credit standing.

As you work to improve your credit, you can keep an eye on your credit score to see the effects. You can view two of your credit scores for free, updated every 30 days, on Credit.com.

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