Have you ever wondered how fast can you improve your credit score?
Well, you’ve come to the perfect place!
So, how long does it take to build credit from scratch?
Building your credit score from the start takes about at least 6 months. But getting a great credit score will take at least a few years.
However, it can go much longer than that since various factors still affect our credit scores.
Building good credit from scratch will require patience, reliability, and discipline.
But don’t worry; in this blog, you’ll learn how long it takes to build credit, and I will also give tips on how to speed up the process.
With my 25 years of experience as a financial coach and banking expert, I’ll guide you on how to not only build your credit from scratch but also how to maintain your credit score to ensure you’ll get the most favorable rates and best terms on your loans.
Building credit from scratch will take time if you’re new to the credit world or re-joining after bankruptcy.
How long does it take to build a credit score?
Building credit is an important feature of your financial state.
However, building a credit score will require time and lots of work.
And once you’ve built your credit to better scores, you’ll still need to maintain them.
So, how long does it take to build credit from scratch?
Well, it depends on different factors.
Every credit-scoring company is unique and uses different models to evaluate credit scores. For instance, FICO and VantageScore are usually used according to the Consumer Financial Protection Bureau or CFPB.
Here are other factors that affect your credit score:
- Payment record
- Debt
- Credit utilization
- Types of credit
- Credit age
- Credit applications
- Co-signed loans
- Business credit cards
- Credit limit increase requests
But to give you a better idea of the timing, it can take anywhere from a few months to even years to get a 700 credit score.
Initial credit scores can greatly impact determining how long it will take to build good credit.
For example, it’s possible to establish a good credit score in just a few months if you’re starting from scratch.
But if you already have a bad credit score, to begin with, it will take you a much longer period.
What credit score do you start with?
“Is the starting credit score zero?”
“Or do we all start with a 300 credit score?”
The credit score that you start with will depend on how you begin to use credit.
There’s no such thing as a “starting credit score.” Every person builds their own unique credit score based on how they use credit.
You can’t have a credit score without a credit history or report first.
What does “building credit” mean?
You’re building credit if you own or use any kind of credit line, like a credit card or installment loan.
You’re now using or maintaining your credit history, which will now give lenders more information on how reliable you are with credit.
But just because you’re building credit doesn’t mean it’s good credit.
If you’re the type of person to miss payment deadlines and run up your card balances, don’t expect to have a good credit score.
To build good credit, you must show that you are responsible enough to make banks or lenders want you to loan money.
You’ll learn more about how to maintain your credit score further down!
How Long Does It Take To Build Credit From Scratch?
If you’re starting from the beginning, you might be asking how long it takes to build credit from scratch.
Building credit will be a long process, and you’ll need lots of patience since establishing a credit score from scratch takes at least six months.
Let’s use FICO as an example.
FICO requires that an individual should have at least one credit account open for six months or more and one active account reported to the credit agencies within the past six months.
Fortunately, one account can meet both of those requirements.
The third requirement in FICO is that there should be no sign on your reports that you are dead.
You should have a credit score within six months if you’ve completed all the requirements above. Then, all you have to worry about is improving your credit score.
FICO score ranges:
- Poor: 300-579.
- Fair: 580-669.
- Good: 670-739.
- Very good: 740-799.
- Exceptional: 800-850.
How long does a 700 credit score take?
Building credit from nothing usually takes about three to six months.
It might take about a year if your target is to achieve 700 credit score.
Remember that your credit history and paying your bills on time can help build your credit score quicker.
However, starting with bad credit may take much longer to build credit since late payments and bankruptcy can stick on your credit report for 7 years.
How long does getting a credit score from 500 to 700 take?
On the other hand, if you’re starting with bad credit, getting to 700 or a good credit score will depend on how hard you are willing to work to build your credit.
Ensure that you pay off collections and pay your debts on time. If you own a credit card, keep your debt to a minimum.
How To Build Your Credit From Scratch
Since you’ve learned how long it takes to build credit, you’re now probably asking, “How do I get my score up from scratch quickly?”
There are a few ways you can do to speed up building your credit.
Here are a few tips on how to build your credit from zero or scratch:
Get A Secured Card
You might want to start small if you’re still young and just about to start.
First, you can consult your local bank to get a secured credit card.
Put your own money on a credit card, which will be counted in your credit.
However, even if it’s your money, it can still have interest rates attached.
That’s why it’s best advised never to spend all of your money without having a way to settle it.
Pay Your Bills On Time
Always pay your bills on time.
Payment history has the most influence when evaluating a FICO score.
Being unable to pay debts or collection balances can cause your credit score to drop drastically and affect your finances for about 7-10 years.
Open a credit builder loan
If you get a credit builder loan, the lender will deposit your approved amount into a savings account, which you’ll pay over time with interest.
Unlike a traditional loan, you won’t immediately leave the bank with the loan or cash.
You’ll get your money once you’ve fully paid the credit builder loan, and the lender will give you the money with any interest earned from the savings account.
This method creates payment history data for your credit report when the lender reports this information to the credit bureaus.
Lower your credit utilization
Lowering your credit utilization ratio is one of the quickest ways to help build credit.
First, you must pay any existing debt.
Try to only use below 30% of your credit limit.
Lenders or banks like to see that you have lots of available credit and you’re not spending much of it.
But if you’ve got, let’s say, a total of $40,000 in available credit but you have a balance of $38,000, lenders will have a hard time trusting and lending you since you’re not financially responsible.
How To Maintain a Good Credit Score
Positive changes to your credit report information can make all the difference when improving your credit score.
Here are a few tips on how to maintain a good credit score:
Charge What You Can Afford
Credit cards are not a way to go on a shopping spree.
If you plan on opening a credit card to build your credit score, just use it for buying things that only fit your budget.
Also, don’t forget to pay for it every month.
Your credit utilization ratio is crucial to regular use and paying on time.
The debt ratio compared to available credit is a big factor affecting your credit score.
Pay Your Bills on Time
I cannot stretch this enough, but you should always pay your bills promptly.
Remember that your credit or payment history greatly impacts your credit scores, and paying late fees or loans will ruin the process.
If you’re having trouble paying your debts on time, here are tips that can help you:
Tips to Help Pay Bills on Time
- Install an Auto-Pay
- Make Calendar Reminders
- Plan a budget that works for you
- Adjust due dates
- Consult Debt Management Plans
Don’t always apply for new credit
Lenders or banks will review your credit, which is considered a hard inquiry if you’re trying to apply for a new credit card or loan.
What is a hard inquiry?
A hard inquiry is checking your credit to see if you’re responsible enough to be given credit. It will temporarily lower your credit score but will bounce back through time and positive reports.
And if you’re always applying for new credit cards or loans, you’ll go through plenty of credit inquiries on your report.
Banks and lenders have difficulty lending to people who constantly apply for more credit.
Monitor Your Credit Report
Monitoring your credit report is also a great way to maintain it.
You can get a free copy of your credit report annually from the three big credit bureaus: Experian, Equifax, and TransUnion.
Check out AnnualCreditReport to get a free report and review it.
Look for signs of fraud or errors and report them if you find anything.
Inaccuracies such as missing accounts, wrong credit limits, and incorrect Social Security Numbers in your report can negatively impact your credit score, which is why monitoring your credit report is essential.
How Long Does It Take To Build Credit From Scratch?: Summary
If you’re new to the credit world, the question “How long does it take to build credit from scratch?” might’ve popped into your head.
Building credit can be as fast as a matter of months.
However, if you want to build an outstanding credit, it’ll take a few years.
The key is to be patient and responsible and make good spending decisions.
A good credit score can give you the advantage of getting any loan you want, together with the best rates and terms.
Even though it’ll take years of effort, let’s start this amazing journey together! I know it will be worth it!