How Long Does It Take to Build Good Credit From Scratch?
Establishing a good credit score takes patience and discipline
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 Get 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 300-850, 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.
VantageScore—another type of credit score—can be generated sooner than your FICO scores. Your FICO credit score is the one to watch over the long term. However, to make sure you are on the right track when starting, your VantageScore can indicate how your actions reflect on your new credit history.
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.
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.
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.
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 parents or spouse’s account.
Authorized users have a credit card and can use it just like the primary account holder, but 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.
If you go this route, the account needs to be in good standing, with a low balance and a history of on-time payments. If not, being an authorized user won’t help you build a good credit score.
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.
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).
Rent payments may not be factored into your credit score depending on the credit bureau, but proof of good payment history on your credit report can help you access lines of credit that will.
You can also opt-in to a new tool offered by the credit bureau Experian that includes utility accounts, such as your cell phone and electric bills, on your credit report and factors them into your score. Note that this won’t impact 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.
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 as your credit utilization ratio—the proportion of debt compared to available credit—is the second biggest factor impacting your credit score.
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.
Pay Your Bills on Time
Since payment history has the most impact on your credit score, don’t let late payments derail your progress.
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 5-10 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.
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 impacts your FICO score, so the longer your accounts are open, the better your credit score.
Monitor Your Credit Report
You’re entitled to a free copy of your credit report from each of the three major credit bureaus each year: 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.
FICO® Score. "FICO® Scores Are Used in Over 90% of U.S. Lending Decisions." Accessed Dec. 25, 2020.
MyFico. "What's in my FICO® Scores?" Accessed Dec. 25, 2020.