|

How Long Does it Take to Build Credit?

Building credit can take time, but how long? You can’t get a good score instantly, but there are things you can do to make a positive impact on your credit score. There are some factors that you have to consider to build better credit scores. The information that you need to know in order to build better credit scores is on this page. Read to the end.

How Long Does It Take To Build Credit?

According to Experian, one of the major credit bureaus, it takes between three and six months of regular credit activity for your file to become thick enough that a credit score can be calculated.

How thick your file becomes depends on how many loans you get during this time, and on how often you use credit.

How Long Does it Take to Build Credit?

About six months of on-time payments should help you get a decent credit score. A great score takes longer. The two main credit scoring systems vary in how soon they’ll show a score.

When you have no credit, working your way up to a good credit score can feel impossibly slow.

Building a credit score from scratch can take a month or two to six months, depending on the type of credit score you are looking at.

How are Credit Scores Calculated?

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 use to calculate your scores.

Their credit scoring is based on information they get on your credit reports. Below are the factors the Consumer Financial Protection Bureau (CFPB) Uses to calculate your credit score.

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

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

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

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

5. 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 more trustworthy credit user in the eyes of lenders.

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

What is Considered a Good Credit Score

Generally speaking, a credit score is a three-digit number ranging from 300 to 850.

Credit scores are calculated using the information in your credit report, including your payment history; the amount of debt you have; and the length of your credit history.

Although ranges vary depending on the credit scoring model, credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; 800 and up are considered excellent.

  • Credit scores are calculated using the information in your credit reports
  • Credit scores generally range from 300 to 850
  • Different lenders have different criteria when it comes to granting credit

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

You can build a good credit score 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 scratch, 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 will have decent credit scores.

How to Build Credit from Nothing

There are a few reasons why you might not have a credit score.

If you haven’t opened a credit card or taken out a loan in the past, then you have what’s known as a “thin credit file.”This means there isn’t enough information available to generate a credit score for you.

This can also happen if it’s been a long time since you last used credit, you’re a new immigrant to the U.S. or you have been recently widowed or divorced.

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

Use Credit-building 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.

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 your 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.

Learn How Credit Scoring Works

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

Keep Up the Good Work

A 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.

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.

How to Start Building a Good Credit Score

Fortunately, there are a few ways to start establishing a credit history and a good score.

Open a Secured Credit Card Account

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.

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.

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.

See if 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).

How to Improve Your Credit Scores

Below are the five things you need to do to improve your credit score according to CFPB. Which are:

1. Increase your Length of Credit History

2. Stay below your credit limit

3. Make on-time payments on a monthly basis

4. Apply for credit only when needed

5. Check your credit records

Fastest Ways to Build Credit

If you have a low credit score, you could find yourself searching for the quickest ways to raise your credit. Although careful use is necessary to improve credit over time, there are steps you may take to get started.

Examine Your Credit Report

Using a tool like Experian Boost, you may report payments for rent, utilities, cellphone service, and even streaming services if you have thin credit that is, few or no credit accounts.

This information helps to show your financial accountability when it is included in your credit scores.

Verify the Balances on Revolving Credit

A high credit utilization ratio and late payments are major factors that affect your credit ratings.

Paying off past-due credit card balances and other revolving debt might raise your credit ratings and stop additional damage.

Limit New Credit Line Applications

Every credit application results in a fresh hard inquiry, which temporarily lowers your credit scores.

Another credit-scoring element that is lowered by a new line of credit is the average age of your credit history.

It is dependent upon your individual financial circumstances if you will be able to obtain specific credit ratings within a given timeframe.

For example, you might have a higher chance of raising your credit score faster if your score is in the upper 600s than if it is 500 or lower.

It takes time and proper use to establish good credit, and speaking with a financial advisor can be of great help.

I believe the information was helpful, don’t hesitate to share it with friends and family. Keep visiting and commenting on our page.

CSN Team.

Similar Posts