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NEW YORK \u2013 The higher your credit score, the better your chance to snag a lower mortgage rate and potentially save tens of thousands of dollars over the life of a loan. But one missed payment or a default can instantly bring a credit score down.<\/p>\n
\u201cDepending on your credit history, a 15- or 20-point shift could mean the difference between being approved or declined \u2013 or better terms or higher costs,\u201d says Rod Griffin, the director of public education at Experian.<\/p>\n
The top way to increase your credit score: Pay your bills on time and reduce your credit card balance. That habit alone can improve a score as quickly as within a few billing cycles.<\/p>\n
\u201cAs a rule of thumb, you could see an appreciable difference in six months,\u201d says Ted Rossman, an industry analyst at CreditCards.com.<\/p>\n
However, \u201cif a missed payment has dragged your score down, your score could rebound in a month or two; a series of late payments will take longer to make a full recovery,\u201d Griffin adds.<\/p>\n
The recovery for a late mortgage payment can take about nine months for a credit score to recover. Filing for bankruptcy could take as long as five to 10 years.<\/p>\n
The overall credit history of the borrower plays a significant role in how fast they can recover from financial mishaps, says Griffin. But \u201cthe better your scores are to start with, the more difficult it is to improve them.\u201d<\/p>\n
A lower credit score reflects a pattern of missed payments, so adding one more missed payment isn\u2019t as significant. But a person with a clean credit report who misses a payment will see a bigger impact, Miron Lulic, founder and CEO of SuperMoney, told CNBC.<\/p>\n
However, the goal needn\u2019t be a perfect score, but \u201cthe goal is to have a score that qualifies you for the best terms of rates, generally 750 or above,\u201d Griffin says.<\/p>\n
Overall, credit scores recently have been at an all-time high, according to FICO. FICO credit scores range from 300 to 850.<\/p>\n
Source: \u201cHere\u2019s How to Improve Your Credit Score Right Away,\u201d CNBC (Feb. 25, 2020)<\/p>\n
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