|

How Long Does It Take To Build Credit For The First Time?

– 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 now to help make a positive impact.

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

READ ALSO!!!

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.

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, generally 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 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

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

First, you might not have any experience using credit yet; 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 very 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:

1. 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.

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.

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.

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.

Good Credit Score

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

1. 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.

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.

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.

READ ALSO!!!

4. 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 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 to Raise Credit Score

1. Dispute Credit-Report Mistakes.

2. Make a Big Debt Payment.

3. Reduce Your Credit Card Statement Balance.

4. Become an Authorized User.

5. Dispute Negative Authorized-User Records.

6. Ask for a Higher Credit Limit.

7. Write a Goodwill Letter.

How to Increase Credit Score Quickly

If you’re struggling with a low score, you’re better positioned to make gains quickly than someone with a strong credit history.

how long does it take to build credit

1. Pay Credit Card Balances Strategically

The portion of your credit limits you’re using at any given time is called your credit utilization. A good guideline: Use less than 30% of your limit on any card, and lower is better. The highest scorers use less than 7%.

You want to make sure your balance is low when the card issuer reports it to the credit bureaus because that’s what is used in calculating your score.

A simple way to do that is to pay down the balance before the billing cycle ends or to pay several times throughout the month to always keep your balance low.

2. Ask For Higher Credit Limits

When your credit limit goes up and your balance stays the same, it instantly lowers your overall credit utilization, which can improve your credit.

If your income has gone up or you’ve added more years of positive credit experience, you have a decent shot at getting a higher limit.

3. Become an Authorized User

If a relative or friend has a credit card account with a high credit limit and a good history of on-time payments, ask to be added as an authorized user.

That adds the account to your credit reports, so its credit limit can help your utilization. Also called “credit piggybacking,” authorized user status allows you to benefit from the primary user’s positive payment history.

The account holder doesn’t have to let you use the card — or even give you the account number — for your credit to improve.

4. Pay Bills on Time

No strategy to improve your credit will be effective if you pay late. Worse, late payments can stay on your credit reports for 7½ years.

If you miss a payment by 30 days or more, call the creditor immediately. Pay up as soon as you can and ask if the creditor will consider no longer reporting the missed payment to the credit bureaus.

Even if the creditor won’t do that, it’s worth getting current on the account ASAP. Every month an account is marked delinquent hurts your score.

5. Dispute Credit Report Errors

A mistake on one of your credit reports could be pulling down your score. Disputing credit report errors can help you quickly improve your credit.

You’re entitled to free reports from each of the three major credit bureaus.

Use AnnualCreditReport.com to request them and then check for mistakes, such as payments marked late when you paid on time, someone else’s credit activity mixed with yours, or negative information that’s too old to be listed anymore.

5. Deal With Collections Accounts

Paying off a collections account removes the threat that you will be sued over the debt, and you may be able to persuade the collection agency to stop reporting the debt once you pay it.

You can also remove collections accounts from your credit reports if they aren’t accurate or are too old to be listed.

6. Use a Secured Credit Card

Another way to build or rebuild your credit is with a secured credit card. This type of card is backed by a cash deposit; you pay it upfront and the deposit amount is usually the same as your credit limit.

You use it as a normal credit card, and your on-time payments help build your credit.

Get Credit for Rent And Utility Payments

Rent reporting services can add your on-time rent payments to your credit reports. Rent payments are not considered by every scoring model; VantageScore includes them but FICO 8 does not, for example.

Even so, if a would-be creditor looks at your reports, rent records will be there, and a long record of consistent payments can only help.

Experian Boost also can help but in a more limited way. You link bank accounts to the free Boost service, which then scans for payments to streaming services and phone and utility bills.

READ ALSO!!!

7. Add To Your Credit Mix

An additional credit account in good standing may help your credit, particularly if it is a type of credit you don’t already have.

If you have only credit cards, consider getting a loan; a credit-builder loan can be a low-cost option. Check that the loan you’re considering adding reports to all three credit bureaus.

If you have only loans or have few credit cards, a new credit card may help. In addition to improving the credit mix, it can reduce your overall credit utilization by providing more available credit.

FAQs on How Long Does It Take To Build Credit

Some common faqs on how long does it take to build credit.

1. How long does it usually take to build credit?

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.


2. How long does it take to get an 800 credit score?

Depending on where you’re starting from, It can take several years or more to build an 800 credit score.

You need to have a few years of only positive payment history and a good mix of credit accounts showing you have experience managing different types of credit cards and loans.


3. What is the fastest way to build your credit?

1. Request Your Free Credit Reports.

2. Verify the Contents of Your Credit Reports.

3. File a Credit Report Dispute If Errors Are Present.

4. Pay Your Bills on Time — Every Time.

5. Become an Authorized User on a Credit Card.

6. Pay Off Debt and Accounts-in-collections Quickly.


4. How do you get an 800 credit score in 45 days?

1. Dispute Credit-Report Mistakes.

2. Make a Big Debt Payment.

3. Reduce Your Credit Card Statement Balance.

4. Become an Authorized User.

5. Dispute Negative Authorized-User Records.

6. Ask for a Higher Credit Limit.

7. Write a Goodwill Letter.


5. What does your credit score have to be to buy a house?

It’s recommended you have a credit score of 620 or higher when you apply for a conventional loan.

If your score is below 620, lenders either won’t be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly payments.


6. How long does it take to get a 720 credit score?

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.


7. What’s the highest credit score?

The best-known range of FICO scores is 300 to 850. Anything above 670 is generally considered to be good.


8. Is Creditkarma accurate?

Credit Karma scores are directly reported by two of the three credit agencies and are as accurate as someone can expect from a free credit monitoring service.


9. What is a good age of credit?

Seven years is deemed a reasonable amount of time to establish a good credit history. After seven years, most negative items will fall off your credit report.

 

However, the seven-year time period doesn’t guarantee your credit score and credit history will improve.


10. Are 2 years of credit history good?

Most lenders (and scoring models) consider anything less than two years of credit history to be little more than a decent start.

 

When you get into the two- to four-year range, you’re just taking the training wheels off.


11. Are 6 months of credit history good?

About six months of on-time payments should help you get a decent credit score. A great score takes longer.

 

While six months is the minimum age before you’re fully scorable, that’s the bottom of the range — way at the bottom.

 

Most lenders (and scoring models) consider anything less than two years of credit history to be little more than a decent start.


12. How old does your credit have to be to buy a house?

It’s recommended you have a credit score of 620 or higher when you apply for a conventional loan.

 

If your score is below 620, lenders either won’t be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly payments.


13. Is it true that after 7 years your credit is clear?

Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit scores may start rising.

 

But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.


12. What credit score do you need to buy a 500k house?

If you have a credit score in the 500s, your best chance for a home loan will be one insured by the Federal Housing Administration.

 

FHA loans allow down payments as low as 3.5%, but to qualify, you’ll need a FICO score of 580 or better. With a credit rating of 500 to 579, you’ll be required to make a 10% down payment.


13. What is a good credit score to buy a house in 2020?

While you don’t need a perfect 850 credit score to get the best mortgage rates, there are general credit score requirements you will need to meet in order to take out a mortgage.

 

Prospective home buyers should aim to have credit scores of 760 or greater to qualify for the best interest rates on mortgages.


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

Leave a Reply

Your email address will not be published.