How Long Does it Take to Build Credit?

Deciding to embark on the journey of improving your credit score is great! You’ve made a responsible decision to better your financial future. However, simply making the decision won’t get you there. Hard work and focus will be required. You also can’t just expect to see results overnight. You might have been doing everything right for months and don’t see a significant change in your score. So, is it even worth it? How long does it take to build credit? 

Don’t give up just yet! Below we unpack the answer to “how long does it take to build credit” and help you navigate the dos and don’ts of building credit.

Building Credit Depends on a Few Factors

The first thing you have to understand is that building credit isn’t just about paying off your debts. There are a few factors that come into play. In fact, most credit scores are based on five key factors – each carrying a different weight. 

These 5 key factors are: 

1. Payment history 
2. Credit utilization 
3. Length of your credit history
4. The amount of outstanding debt
5. Any new credit applications. 

How Long Does It Take to Establish Credit?

On your credit building journey, you also need to distinguish between building credit and establishing credit. Establishing credit is different from building credit. 

If you’ve never had any credit before you will first need to establish a credit score before you can build it. In most cases, you have to wait at least 6 months before you can get a FICO score. 

There are some other credit scoring models such as VantageScore that don’t require 6 months of information before it churns out a score for you. As soon as you open a credit account and your account starts reporting, VantageScore will give you a credit score. Keep in mind, however, many lenders only rely on your FICO score when considering your credit application. So, a lender who doesn’t use other credit scoring models won’t see any credit score for you until you’ve reached the 6-month mark. 

Once you get your first credit score, you will still have what is called a thin credit file. This simply means even though you do have some credit history, there isn’t much information available to base your credit score on. So, your information is too limited for lenders to make a decision with confidence. It is also unlikely that your first score will be anything to get excited about! Building a good credit score will take much longer.

How Long to Build Good Credit?

Building a good credit score takes time and dedication. There are no specific time frames, but you can’t expect fast results. 

Building a credit history with the major credit bureaus takes anything from 3 to 6 months. Your payment history will be the most influential factor that determines your good credit. Payment history counts for 35% of your FICO score. So, you need to make sure you don’t miss any payments while you are building good credit. One missed payment can stay on your credit report for up to seven years! Your credit history has a long memory!

If you are aiming to build an excellent credit score, it could even take up to 7 years. Plus, while you’re on this journey, you’ll have to focus to not do anything to negatively impact your credit score. We look at this in more detail below. 

Ways to Build Credit

There are many things you can do (and should avoid doing) to build your credit over the long run. You can take a look here at ways to build your credit. 

Two of the biggest factors to building your credit will be payment history and credit utilization (in fact – together they make up 70% of your score). So, focusing on paying off your debt and utilizing credit is a good start to building credit. 

Let’s take a closer look.

Utilize Credit

Using credit responsibly is a good thing. Showing you can handle your credit responsibly will help you raise your credit score. 

Your credit utilization rate can also have a positive or negative impact on your credit score. Your credit utilization rate is how much of your available credit you are using. It is mostly recommended that you keep your credit utilization rate below 30%. 

Pay off a Loan

Paying off a loan is also a great way to build your credit score. Firstly, consistent on-time payments will boost your credit score and forms part of your payment history. Paying off your loan and closing your credit account will also be a boost of confidence to show you can handle your credit and will build your credit score.

Rebuilding Credit Can Take Longer

If you once had a good credit score but accidentally made a mistake resulting in poor credit, you may have a long road ahead of you to rebuild your credit. Rebuilding poor credit takes much longer than destroying it. Because your credit history has a long memory, rebuilding your credit will also take much longer than building it in the first place. 

The major negative items on your credit score such as bankruptcy or foreclosure can remain on your credit report for up to 10 years. If you find yourself in a situation like this your best plan would be to apply patience and consistent financial behavior. If you add new positive information to your credit report it will generally outweigh old negative information. 

Also, keep in mind rebuilding credit isn’t the same as repairing credit. Credit repairing is when you go over your credit report and have errors fixed. When you rebuild your credit, you add new positive information to your report to outweigh the negative. 

What Not to Do if You Want to Build Credit

Just like you have to practice certain habits to build your credit, there are some things you should avoid if you want to build good credit. 

As we explained above, missing a payment is the biggest no-no if you want to build your credit score. Even making a payment late will affect your score. 

You should also be careful about applying for new credit frequently. If you apply for new loans shortly after each other, it will reflect on your credit history and can be seen as risky behavior – bringing down your credit score. 

Your credit utilization rate is also something that can help you build your credit score or break it down. If your credit utilization rate is high (i.e. you are using a lot of your available credit) your credit score will drop. 

Finally, your credit score is also affected by your debt to income ratio. This is how much debt you have relative to your income. The higher your debt to income ratio, the more negatively it will affect your credit score.

Conclusion

How long does it take to build credit? Well, it will depend on you and what you do. Most importantly, be patient and don’t give up. Make sure you cultivate good habits and you will reap the rewards in the long term. 

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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