How Long Does It Take To Build Credit?

If you’re looking to borrow money, you’re probably wondering: How long does it take to build credit? Interestingly for those curious to learn how fast can you build credit; the answer is in as little as just 3-6 months. That said, if you’re thinking about how to go about establishing a strong credit history and good credit score, it also pays to keep a few additional items in mind here. Below, we’ll take a closer look at what factors impact your credit score, ways to build your credit, and how long it takes to establish a credit history.

What Credit Score Do You Start With?

For clarity’s sake, your credit score is a three-digit number that credit bureaus assign to you as an individual. It offers prospective lenders a sense of how well that you’ve managed debt in the past – and provides them with a snapshot of what potential risk that you might present as a borrower.

Financial institutions use your credit score as a method to assess how likely you are to successfully repay loans in timely fashion. As a rule of thumb, the higher that your credit score is, the more creditworthy you’ll seem to lenders – and the more and better loan offers that you may enjoy access to.

First-time borrowers wondering how long it takes to build credit should know that folks who start with no credit history typically do not have a credit score at all. That’s good news, in some sense, as it means that you won’t actually start out with the lowest possible score. In fact, it’s a common situation to have no credit score at all if, for example, you’re a minor, haven’t ever opened a credit card, or have not taken out a car or student loan before. In effect, to start building a credit score, debt needs to officially be taken out in your name.

How Is A Credit Score Calculated?

Organizations including FICO^® and VantageScore^® tap into information provided by each of the main three credit bureaus (Experian™, Equifax^® and TransUnion^®) to compute your credit score as a consumer. Five major factors – including payment history, amounts owed, length of your credit history, new credit, and credit mix – are used when calculating the figure, each of which is weighted differently.

Keep in mind that your credit score can actually vary based on varying credit scoring models, meaning that it won’t necessarily be the same under all scenarios as well. Similarly, in some circumstances, you may find that different bills, charges, and outstanding balances may be used in scoring calculations. As a borrower, you’ll also want to regularly request copies of your credit reports and review them for inaccuracies or inconsistencies to make sure that your credit score is being reported accurately.

What Is The Best Way To Establish Credit?

Thankfully for anyone curious about how long it takes to build credit, and what it takes to maintain a good credit score, you needn’t worry too much about getting a financial history established when ready. That’s because there are several good ways to start building your credit in no time flat – even with little to no prior credit history. For instance, you might:

• Get a credit-builder loan. Credit-builder loans help you to build your credit history without having to sign up for a credit card. Take one out, and you’ll effectively borrow a small amount of money (say, $300 - $1,000 on average), which a financial lender puts into an account that’s been set aside for you. Afterwards, you’ll make regular payments to the lender, and once the loan is paid off, you’re given access to the account with the lump sum that you originally borrowed. In essence, as you make regular, on-time payments here, your lender will report your payment history to the major credit bureaus, helping you build your credit history. Keep in mind though that interest payments will need to be made over the loan’s lifetime, a portion of which may be refunded by some lenders.
• Apply for a secured credit card. How can you get a credit card with no credit? That’s easy: Sign up for a secured credit card, which you’ll back by making a cash deposit up-front, which a lender generally asks you to place in a savings account. Your card’s total credit limit will then be set at the full amount or a percentage of the total funds squirreled away in this account. You can use a secured credit card like any other credit card to charge purchases and make payments – and by keeping a zero or low balance and routinely paying your bills each month, leverage it to start establishing a credit history. Such solutions are meant to be used as a starter option that can help you build your credit history and qualify for more credit card opportunities and better rates later on.
• Become an authorized user. If you become an authorized user on a family member or friend’s credit card, it can also help you establish a credit history and build your credit. For instance, many parents add their children to their preexisting accounts each year as a way to help them get a head start on their financial journey. It’s a common and handy way for folks with limited financing experience to get started establishing a history of borrowing and repayment.
• Take out a student credit card. If you’re currently a student, as a young adult, you can register for a special card that can help you get started building a credit history. Options here frequently come with a range of special promotional offers, discounts, and rewards attached as an incentive. Mind you: Most student credit cards are often subject to lower credit limits and come with higher interest rates attached, so you’ll especially want to keep balances low and payments coming in on time here.
• Use a loan to fund your car, education, or everyday expenses. Taking out auto, personal and student loans and paying them consistently is another way to help establish your credit. That’s because such loans are reported to top credit bureaus. Regularly paying all of your outstanding loan balances on time can therefore help you boost your credit. Conversely though, missing or late payments can also negatively impact your credit scores as well, rendering the practice of making routine and timely payment important to maintain.

How Long Does It Take To Build Good Credit?

If you want to build good credit with little to no credit history, note that it can take some time to establish, regardless of whether you’re starting from scratch or have prior financial activity to build on. Also keep in mind that actual timeframes here will vary depending on your individual circumstances.

But typically, in most cases, you’ll be able to establish a basic credit history in 3 - 6 months. It may take years, however, to build good credit and a high score. Lenders need a sizable timeframe’s worth of information and data to draw on as they seek to accurately determine your creditworthiness, after all.

How Long Does It Take To Improve Credit Score?

If you’re looking to improve an established credit score, it can take 3-6 months or more of consistent activity to see a significant boost here, though you may start seeing slight improvements in as little as 30 - 45 days. During this time, it’s important to make sure that you’re making your monthly payments on existing loans on time and practicing other good financial habits. As you’ll see below, maintaining a health mix of credit options, not drawing too heavily on credit lines, and not quickly opening a series of new accounts in rapid succession can help you in your efforts here. Keep in mind that improving your credit score isn’t an overnight process. Rather, it takes time and dedication, but your patience may be well-rewarded with better credit and loan terms and options in the end.

Tips For Building Good Credit

If you’re looking to build good credit or improve creditworthiness, it’s important to keep several hints, tips, and strategies in mind. Practicing the following sound financial habits can help you improve your chances of boosting your credit score.

• Make on-time payments. Lenders and companies to which you pay regular, recurring bills (mortgage lending firms and your local utility providers) often report such payment activity to credit bureaus. As a result, it’s important to make regular, recurring, and timely payments as agreed with lenders under the terms and conditions of your contracts. Failure to do so can result in a negative impact to your credit.
• Dispute any inaccuracies on a credit report. Credit bureaus don’t always get credit reporting right. As an individual borrower, it’s important to keep tabs on your accounts and affairs to make sure that they’re being reported accurately. That means that you can often boost your credit by reviewing these documents and disputing errors on your credit report.
• Keep your credit utilization low. Lenders like to know that you’ve been approved for and given access to differing credit facilities. At the same time, they also want to know that you’re not leaning too heavily on these credit options, which may indicate signs of financial difficulties. Put simply, it helps to apply for obtain several different forms of credit, but to not tap into them too heavily, which can weigh down your credit score.
• Space out credit and loan applications. Often, financial lenders will see it as a potential red flag if they think that you’re applying for new lines of credit too much or too close together. If you need access to additional funds, it’s helpful to either concentrate any applications that you plan on filing for the same type of loan within a 2-week period or to space out your inquiries so that they occur every 6 months or so.
• Don’t close unused credit accounts. Paradoxically, keeping unused credit cards and other revolving credit accounts open can actually help you, as the trail of accounts can help bolster that you have a long-running track record and credit history. Being able to access such accounts (without having to tap into them) can thus actually be seen as a point in your favor. However, you’ll also want to remember to keep a close eye on any such accounts for possible fraudulent activity.

The Bottom Line

In the end, if you’re curious about how long it takes to build credit, the answer is that you can do so in relatively short amount of time. If you’re looking to build out a track record here, a number of helpful options are further available that can aid those seeking to establish their credit history and a good credit score, even without prior credit.

That said, if you’re thinking about borrowing money, it’s critical to make timely and full payment of debt whenever possible, as credit bureaus and lenders maintain a watchful eye on these accounts. In addition, it’s also important for you to monitor your credit report once you’ve started building out your history. Doing so can help you both potentially enhance your credit score and get a better sense of just how creditworthy that you might look in the eyes of any given financial lender.

Looking to build and grow your credit score? To more easily keep tabs on your finances and pay your bills, be sure to download the Rocket Money℠ app today!