How Long Does it Take to Build a Credit

How long does it take to build credit? Building a good credit score from nothing takes patience and discipline. It won’t happen overnight, but you can do things to speed up the process and make sure your score doesn’t slip in the process.

how long does it take to build a credit

What Makes a Good Credit Score?

To build a credit score from scratch, you first need to use credit, such as by opening and using a credit card or paying back a loan.

It will take about six months of credit activity to establish enough history for a FICO credit score, which is used in 90% of lending decisions.

FICO credit scores range from 300 to 850, and a score of over 700 is considered a good credit score. Scores over 800 are considered excellent. 

Don’t expect a spectacular number right off the bat. While you can build up enough credit history in less than a year to generate a score, it takes years of smart credit use to get a good or excellent credit score. 

Why Does it Take Time to Build Excellent Credit?

When you are just starting to build a credit score, time doesn’t work in your favor. Lenders want to see good behavior over time, which is much of what FICO scores take into account: 

‣ Payment history (35% of score): Have you made on-time payments consistently?

‣ Amounts owed (30% of score): How much debt do you have compared to how much available credit you have?

‣ Length of credit history (15% of score): On average, how long have your accounts been open?

‣ New credit (10% of score): Have you opened several new credit accounts in a short amount of time?

‣ Credit mix (10% of score): Do you have experience managing different types of credit and loans?

Proof that you make payments on time and don’t carry large balances on credit cards makes you a less risky, more trustworthy credit user in the eyes of lenders.

Those responsible behaviors carry more weight when demonstrated over time, too, which is why building a good credit score from scratch doesn’t happen overnight.

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How to Start Building a Good Credit Score

Unfortunately, the tricky part about building a credit score is getting the credit you need to create a credit history for a score. Fortunately, there are a few ways to start establishing a credit history and a good score.

1. Open a Secured Credit Card Account

Secured cards are designed for those with no credit history or those who are rebuilding credit. 

You can open a secured card when you aren’t eligible for other cards because this type of credit card requires a deposit.

The deposit acts as collateral for the issuer if you stop making payments, so it’s less risky for them to approve you. Secured card deposits are refundable.

Many issuers will upgrade you to an unsecured card upon request. After you’ve demonstrated you can wisely manage the card. 

Credit card issuers report card balances and payment history to the credit bureaus typically every 30 days. So, it’s easy to build a credit history with a credit card since those factors have big impacts on FICO credit scores.

Each month you make an on-time credit card payment and don’t carry a balance on your secured card, your credit score should rise.

2. Become an Authorized User on Someone Else’s Card

While you might not be approved for a regular credit card, you could become an authorized user on someone else’s account, like your parent’s or spouse’s account. 

Authorized users have a credit card and can use it just like the primary account holder, but they have no legal responsibility for the account.

The credit history of the account shows up on the authorized user’s credit report so long as the card issuer reports authorized user data to a credit bureau, which can give you a credit score boost.

Becoming an authorized user is a way to jump-start credit score growth and is not a long-term fix. Real credit score growth will come from building your credit history, not piggybacking on someone else’s.

Think of this option as a stepping-stone to get you to your next credit tool, whether that’s your credit card or a small personal loan

3. Get a Credit-Builder Loan

When you get a credit-builder loan, the lender will deposit the amount you are approved for into a savings account. Then you repay that loan over time, plus interest Unlike a traditional loan, you don’t walk away from the bank with money right away.

Instead, once you’ve paid the credit-builder loan in full, the lender will give you the money with any interest earned from the savings account.   

This process establishes payment history data for your report, as long as the lender reports those details to the credit bureaus. Before getting a credit builder loan, verify the lender will report your payments to a credit bureau. 

Does Non-Credit Bill Payments Count Toward Your Credit History

You are probably already making rent and utility payments. If you do so on time, that good payment history may help you build up a credit report. 

Not all landlords report rent payments to a credit bureau, but check to see if yours does through an outside service.

If not, there are rent credit reporting services, such as RentTrack and PayYourRent, that will process your rent payment and report it to the credit bureaus (for a fee, if your landlord is not signed up).

You can also opt into a new tool offered by credit bureau Experian that includes utility accounts, such as your cellphone and electric bills, on your credit report and factors them into your score.

Note that this won’t affect your credit files with Equifax and TransUnion, the other two major credit bureaus. So, if a lender doesn’t use Experian for reports and credit scores, the lender won’t see the boost.

How to Maintain a Good Credit Score

All it takes to raise your credit score are positive changes to your credit report information. It’s actually easier to damage your credit than it is to build it, so here’s what you should do to keep your credit on the up and up once you get started.

1. Only Charge What You Can Afford

Credit cards are a tool, not an excuse for a shopping spree. If you open a card to start building a credit score, use it for small purchases that fit your budget and pay the card off in full each month.

Regular use and full payment are important because your credit utilization ratio the proportion of debt compared to available credit is the second biggest factor impacting your credit score. 

2. If You Carry a Balance, Pay More Than the Minimum Due

The goal is to keep your credit utilization ratio as low as possible, so the more you can pay each month, the better.

You will chip away at your debt faster, helping to decrease your credit utilization rate and raise your score, and you will save money on interest.

3. Pay Your Bills on Time

Since payment history has the most impact on your credit score, don’t let late payments derail your progress.

4. Don’t Apply for Lots of New Credit Cards

When you apply for a new credit card or loan, the issuing bank will check your credit, which is considered a hard inquiry.

Hard inquiries will cause your credit score to dip temporarily. It’ll bounce back as time passes and more positive behavior is reported.

However, if you are already starting from scratch, even a slight dip of five to 10 points can be significant. Plus, credit bureaus keep tabs on how many times you apply for new lines of credit.

Too many hard inquiries on your credit report can be a sign that you are desperately seeking credit and pose a risk to lenders. 

5. Don’t Close Any Card Accounts 

When you are new to credit and building a score from nothing, time is your friend. Even if a year from now, you have a card you no longer want or use, keep the account open unless it charges an annual fee.

The length of your credit history directly affects your FICO score, so the longer your accounts are open, the better your credit score. 

6. Monitor Your Credit Report

You’re entitled to a free copy of your credit report every year from each of the three major credit bureaus: Experian, Equifax, and TransUnion.

Visit AnnualCreditReport.com to access a free report and familiarize yourself with it. Check for inaccuracies and signs of fraud, and if you find something amiss, report it immediately.

How Long Does it Take to Build a Good Credit Score?

You can build a good credit score fairly quickly, provided you are able to consistently pay bills on time and not use too much of your available credit limits on credit cards.

On the flip side, damaging your score does not take much time. A single payment that’s 30 days late can tank a good score.

If you have never used credit before, read on to explore ways you can build credit from scratches, such as with a credit-builder loan or a secured credit card.

If you have a student loan or have been an authorized user on a parent’s credit card, you’ll have a credit report and a credit history but won’t instantly have a score.

Credit scores are generated from information in your credit reports. Once you’ve built up several months of on-time payments and your creditors have reported them to the three major credit bureaus, you should have decent credit scores.

How to Build Credit From Nothing

Here are some ways you can give a thin credit file a boost:

1. Use Credit-Blinding Products

Getting a credit-builder loan, a secured credit card or an alternative credit card can help you bulk up your credit history and establish a score.

2. Become an Authorized User on a Credit Card

If you are close to someone who has good credit, ask if they’ll add you as an authorized user on a credit card. They should call the issuer to make sure it reports authorized user activity to the credit bureaus.

Being an authorized user lets you benefit from the length of their credit history and may diversify the types of credit on your report, both of which can build your credit.

You don’t need to use the card to reap the benefit of being an authorized user.

Being added as an authorized user can also reduce the time it takes to generate a FICO score, assuming the account you are added to is older than six months.

3. Learn How Credit Scoring Works

Knowing the factors that influence credit scores can help you understand what is within your power when it comes to building a good score.

4. Keep up the Good Work

Good credit history of on-time payments stays on your credit report forever, as long as the accounts stay open. If you have setbacks with credit over time, don’t worry. You can take steps to rebuild credit and work toward a good score again.

After you build up your score, you’ll be able to take advantage of credit card products that offer rewards and incentives to qualified applicants.

What’s next?

There’s one thing that borrowers with great credit scores tend to have in common and younger borrowers lack: longevity.

If you just got your first credit card, you’re not going to have a score over 800, no matter how hard you try. Make building your credit a long-term goal

The 3 fastest ways to build credit

Here are three fast ways to build credit.

1. Get a Credit Card

If you can’t qualify for a “regular,” unsecured credit card, you can try applying for a secured credit card. Since a secured card requires a security deposit and doesn’t let you spend past your limit, it’s easier to access than unsecured cards.

At the end of the day, credit cards can help you build credit faster because of how often your information is reported to credit bureaus.

Many credit card issuers report information about your credit card balance and payment each month. So if you make a purchase or two each month and then pay them off, that will be reflected in your credit history.

Both FICO® and VantageScore heavily weigh payment history, as well as how much of your credit you are using.

Therefore, each time you make an on-time credit card payment and maintain your outstanding balance below 30% of what’s available to you, you create positive information for your credit report.

2. Pay Off an Installment Loan

You can also add a little bit more to your credit file by getting an installment loan and making on-time payments. Did you know that your student loans are installment loans?

Additionally, you can get a personal loan and pay it off in installments.

Essentially, diversity of credit makes a significant positive difference to your score. And having a small personal loan, on top of a credit card, can be an effective way to build good credit from scratch.

That said, you probably don’t want to take on debt you don’t need simply to build your credit. But if you need an installment loan, make sure to borrow only as much as you can afford to pay back and to make on-time payments.

3. Become an Authorized User on Someone Else’s Account

Another way to pad your thin credit file and build credit faster is to have yourself added as an authorized user to someone else’s account. You can do this if you have a close relationship with the account owner, so this strategy works best with a parent or a spouse.

And, if your parents are willing to add you as an authorized user, you get the benefit of their good credit. You won’t see the same impact as you would with your own credit, but it does help — even if you never use the credit card you are issued.

4. Avoid These Missteps to Protect Your Credit

Unfortunately, it’s much harder to build good credit than it is to destroy it. While it takes three to six months just to accrue enough information in your file to be issued a credit score, it can take much less time to reduce it.

When you miss a payment or default on a loan, it can take your credit score down a notch. You can also hurt your credit score if you use too much of your available credit. It’s best to keep your credit utilization below 30% to preserve your credit.

Garnering lots of hard credit inquiries can also ding your score, so make sure to take advantage of soft credit checks or to keep any loan shopping within a 30-day window.

By avoiding these and other financial missteps, you can protect your credit score from getting damaged.

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Why Should You Maintain Good Credit?

Why Should You Maintain Good Credit?

Building good credit is essential to your long-term financial health if you want to be able to borrow for major purchases like homes and cars.

Although it takes some time to build good credit from scratch, it’s not impossible. Once you build that credit, though, it’s important to stay on top of things so you don’t end up destroying everything you’ve worked so hard to build.

Tips to Help Cut the Time It Takes to Build Good Credit

Although you probably can’t cut the time it takes to get your first credit score to less than six months, focusing on the behaviors that lenders want to see can help you get to a good or excellent score sooner than you might otherwise. 

To get a good or better score:

‣ Pay your bills on time. Your payment history has the single greatest impact on your score, so it’s vital to make your payments by the due date.

‣ Use your card carefully. Keep your spending well below your credit limit using less than 30% of your available credit is recommended. But even lower utilization can help boost your score as long as you keep it above zero.

‣ Pursue variety. Creditors ideally want to see a mix of credit cards and installment loans on your report to show you have experience managing different types of debt.

‣ Keep your accounts open. This process is about building history, so apply for credit cards you intend to keep.

‣ Apply carefully. Apply for credit when you’ve researched the terms and potential perks and believe you have a good shot at getting approved.

If you’re denied, you’ll have to apply again and each application triggers a hard inquiry that will lower your credit score by a few points.

How Long Does It Take to Establish Good Credit?

Establishing credit from scratch takes at least six months, but using that time wisely can help you build a strong foundation for your credit future.

1. Having good credit means having a good credit history.

History isn’t instant. If you haven’t used credit before, it usually takes at least six months to generate a credit score and longer to earn a good or excellent score.

It’s usually easier and faster to establish your first credit score than to repair one, so use those first six months to develop responsible credit habits that can set you up for long-term financial success.

The better you understand how credit scores are calculated and used, the more evident it becomes why it takes six months.

2. Understand the Credit Score Calculation to Help Build Your Credit

Once you understand the principles behind credit score calculations, you can begin working toward a good credit score with greater confidence.

Although there are many credit scoring models, the two leaders are FICO and VantageScore, both of which issue scores ranging from 300 to 850.

Scores above 670 are considered good to exceptional in the FICO model, which is more widely used by lenders. 

The algorithms for calculating your credit score are considered trade secrets. FICO shares the following general guidelines:

  • 35% is based on your on-time payment record.
  • 30% is based on credit utilization.
  • 15% is based on the length of credit history.
  • 10% is based on the credit mix
  • 10% is based on recent borrowing inquiries. 

Some of the best ways to build a good credit score are to pay your bills on time, keep your utilization low, and focus your efforts on a small and balanced portfolio of different types of debt.

Tips to How Cut the Time it Takes to Build Good Credit

Although you probably can’t cut the time it takes to get your first credit score to less than six months, focusing on the behaviors that lenders want to see can help you get to a good or excellent score sooner than you might otherwise. 

To get a good or better score:

  • Pay your bills on time. Your payment history has the single greatest impact on your score, so it’s vital to make your payments by the due date.
  • Use your card carefully. Keeping your spending well below your credit limit using less than 30% of your available credit is recommended. But even lower utilization can help boost your score as long as you keep it above zero.
  • Pursue variety. Creditors ideally want to see a mix of credit cards and installment loans on your report to show you have experience managing different types of debt.
  • Keep your accounts open. This process is about building history, so apply for credit cards you intend to keep.
  • Apply carefully. Apply for credit when you’ve researched the terms and potential perks and believe you have a good shot at getting approved.
  • If you’re denied, you’ll have to apply again and each application triggers a hard inquiry that will lower your credit score by a few points. 

And Try to Avoid:

Falling behind. Any payment more than 30 days late will be reported to the credit agencies and will likely hurt your score. The later the payment, the greater the damage.

Above all, don’t fall so far behind that your account is charged off or assigned to a collection agency.

Overcharging. The more of your total available credit you use, the more likely it will hurt your score. Maxing out your card – or even getting close – is a red flag for lenders.

Closing accounts. Closing one account can reduce the average length of credit history of all your accounts. From a credit score perspective, it’s better to keep your account open.

Applying indiscriminately. It’s not a good idea to apply for a bunch of credit cards just to see whether you get approved. It takes a few points off your score every time a creditor pulls your credit report for the purpose of making a lending decision.

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Start Building Credit by Borrowing Money

Start Building Credit by Borrowing Money

Just as you can’t earn a grade without enrolling in a class, you can’t establish a credit profile without borrowing money. If you’re starting from scratch, you have several options:

‣ Get a standard credit card. Your strongest option is a credit card in your own name that isn’t tied to any collateral.

But it may also be the toughest option because it’s hard to get credit without having credit.

Still, you may qualify for a card with a low credit limit if you’re a student, a credit union member, or have an established banking history, such as a checking account that you’ve had for many years and haven’t overdrawn.

‣ Get a secured card. Secured credit cards are easier to get because you deposit the equivalent of your credit limit with the card issuer. It’s low risk for the lender because if you default on your payments, it can keep your deposit.

‣ Become an authorized user. If someone you know already has established credit, you may be able to build your credit by becoming an additional card member on their account.

Think carefully about this option – your behavior, as well as the account holder’s, will affect both your credit scores.

‣ Find a co-signer. Banks are more likely to extend credit if someone with good credit agrees to accept responsibility for your debt should you default.

‣ Get a credit-builder loan. These loans are designed specifically to help people build credit but are usually far down the options list because you generally can’t access the money until after you’ve repaid it.

The lender puts the borrowed money into a special account, where it stays until you’ve made all the payments. Those payments are reported to the credit reporting agencies and so help build your credit.

Frequently Asked Questions (FAQs)

Here are answers to some frequently asked questions

You don’t start with any credit score, and you won’t get a score until you open a credit account that reports to the credit bureaus. Once you open an account, you will receive a score based on that account.

It probably won’t be the best score since you don’t have a long enough credit history, but it won’t be the worst score, either.

All else remaining equal, your credit score will recover from a hard check within a few months. The inquiry may technically remain on your credit report for a bit longer, but the effect of a single hard inquiry on your score is minimal and temporary.

Credit card companies have a lot of flexibility in reporting to bureaus, but they usually do so at least once a month. Therefore, you can expect your credit card habits to start impacting your credit score within a month.

However, it may not have enough of an impact to move your credit score; the size of the impact depends on your existing credit history.

It will take about six months of credit activity to establish enough history for a FICO credit score, which is used in 90% of lending decisions. 

Ethereum Classic, which is not to be confused with the cryptocurrency Ethereum, is a separate entity that works on its own. Ethereum Classic uses the same blockchain as Ethereum and follows the same consensus rules.

While Ethereum Classic is one of the most valuable cryptocurrencies in terms of market capitalization, it is a fraction of the size of Ethereum.

Ethereum Classic and Ethereum are quite similar since they have the same ancestor. It’s a blockchain that allows developers to build other applications on top of it.

Smart contract programming is used in these decentralized applications, or apps, to allow users to exchange money, property, or anything else of value without the need for an intermediary.

ETC is the network’s native currency. DApps can also create their own tokens, such as NFTs, on the Ethereum Classic network.

Not to be confused with the cryptocurrency Ethereum, Ethereum Classic is a separate entity. Ethereum Classic is built on the same blockchain as Ethereum and follows the same consensus rules.

While Ethereum Classic is one of the most valuable cryptocurrencies, it is far less than Ethereum in terms of market capitalization.

Ethereum Classic and Ethereum are fairly similar because they share a shared origin. It’s a blockchain on which other applications can be built.

Smart contract programming allows users to exchange money, property, or anything else of value without the need for a mediator in these decentralized applications, or damps.

ETC is the money of the network. DApps can also create their own tokens, including NFTs, on the Ethereum Classic network

However, what does this entail in terms of your credit utilization? You can lower the amount your card issuer reports to the credit bureaus by making an early payment before your billing cycle finishes.

As a result, your credit utilization will be reduced. Your credit ratings may improve as a result of this.

To develop enough credit history for a FICO credit score, which is used in 90% of loan decisions, it will require around six months of credit activity.

once you have opened a secured credit card, it takes about 30-45 days for the account to be reported to the credit bureaus.

The time it takes for your credit score to update varies, but it normally happens every 30 to 45 days. Finally, each loan provider’s conduct differs, and some may provide updates more frequently than others.

Please do well to share this article with friends and loved ones. Leave comments and questions in the comment box below.

CSN Team.

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