We all want good credit. Good credit means access to better loans and credit cards, lower interest rates, and generally more privileged status in all your financial dealings. When your credit score is high, the red carpet rolls out, and that just makes life easier. A good credit score also brings a certain sense of satisfaction: it means you’re doing something right.
If you’re just starting out on your financial journey or if your credit has suffered damage, really good credit may seem unattainable. It’s not. You won’t do it overnight, but you can do it. Your next question is likely to be, “fine, but how long will it take.”
To understand the time it takes to build credit, we have to take a quick look at how your credit score is generated.
Where Does Your Credit Score Come From
Most credit scores are provided by two companies: FICO and VantageScore.
👉 Most creditors use FICO.
👉 Most free credit score providers use VantageScore.
Both providers use different scoring models for different clients, so you actually have many credit scores. The one most commonly used is the FICO 8 score.
Credit scores are calculated from the information in credit files kept by the three major credit reporting companies: Experian, Equifax, and TransUnion. This information is reported voluntarily by your creditors. If you’ve never had any credit accounts, you won’t have a credit score because there will be no information to base a score on.
How Is Your Credit Score Calculated
Your credit score is a mirror of the way you handle credit. These are the main criteria used to calculate your FICO 8 credit score.
- Payment history makes up 35% of your credit score. Creditors want to know that you have paid your debts on time.
- Amounts owed make up 30% of your score. This is a measure of your credit utilization: the percentage of your available credit that you use.
- The length of your credit history represents 15% of your FICO 8 score. A longer credit history helps your score.
- Your credit mix makes up 10% of your score. A combination of installment loans and revolving credit (like credit cards) will help your score.
- New credit accounts for the last 10%. Opening or applying for lots of new accounts can damage your score.
Knowing how those elements combine to form your credit score will help you develop a plan to build good credit fast.
📕 Read more on how your credit score is calculated.
How to Build Good Credit
Thousands of articles have been written on how to build good credit, but they all come back to a few basic points.
- Make your payments on time. The single most important step toward good credit is a clean payment history. Never charge more than you can afford to pay.
- Watch your credit utilization. Keep your credit card balance below 30% of your credit limit. Under 10% is even better.
- Don’t close old accounts. Unless you’re paying a large fee, leave your older accounts open to extend your credit history.
- Diversify your credit mix. Try to use both credit cards and installment loans.
- Don’t apply for new credit unless you really need it. Too many applications can hurt your score.
Of course, you can’t manage credit well if you don’t have any, and if you’re just starting out or recovering from a bad spell, you may not have any. Secured credit cards and credit builder loans make great starting points.
📕 Learn more about the best ways to build credit.
How Long Does it Take to Build Credit?
Now that we know where our credit scores come from and what we need to do to build them, let’s get back to the question we started with: how long will it take? That depends largely on whether you’re building credit for the first time or trying to rebuild damaged credit.
How Long Does It Take to Build Credit for the First Time?
If you’ve never used credit before and have no credit score, a good or excellent score may seem unattainable. That’s not actually the case. You may even have an advantage: your blank slate is actually a clean slate. You’ll have no black marks to drag your credit down, and if you manage your credit carefully, you can build up a positive record reasonably quickly.
Start by reading up on effective ways to start building credit at 18. Most of these methods are simple, straightforward, effective, and proven. You probably won’t be able to implement them all simultaneously, but if you use all or most of these methods, you should have enough information in your file to generate a credit score in about 6 months.
If you want to know how long it will take you to build good or excellent credit, the truth is that nobody can give you an exact answer. How long it takes to reach good or excellent credit will depend on the types of credit you use and how regularly you use it. If you continue to use credit responsibly and avoid slip-ups – even a single collection account or charge-off can negate months of good work – you will see a steady improvement in your credit score.
How Long Does It Take to Rebuild Credit?
Rebuilding damaged credit is more difficult and takes longer than building credit for the first time. That’s because those old mistakes don’t just disappear from your credit report. They will be there for seven years, or ten years in the case of Chapter 7 bankruptcy.
That doesn’t mean you have no chance to build your credit and eventually achieve a good or excellent credit score. Those old black marks will be there, but their impact on your credit score will fade with time because credit scoring models give a higher weight to more recent information.
There’s nothing you can do to remove accurate information from your credit report. Anyone who claims to be able to remove negative entries from your credit report or create a new credit identity for you is almost certainly a scammer. Know the signs of a credit repair scam and be careful.
If you’re trying to repair damaged credit, you have two jobs.
👉 The first is to keep those negative entries in the past. Learn from those errors and don’t repeat them. As long as you keep those black marks in the past, their influence on your credit will fade. Add new ones, and you’ll set yourself back dramatically.
👉 Your second job is to balance out those old negative entries with new positive ones. That comes down to the same rules we described above: use credit, make all payments on time, keep your credit utilization down.
Eventually, those newer positives will outweigh the old negatives. That will take time – potentially years if your credit was badly damaged – but it will happen.
Focus On the Goal(s)
The goal is simple, right? It’s all about getting good credit.
Well, not quite. Good credit is important, but don’t forget that your credit score represents your overall financial state. That means a lot more than a three-digit number. It may take time to build that credit score you dream of, but you can do it, and you’ll probably start feeling the advantages of better financial management before you start seeing the difference in your credit score! The same steps you take to improve your credit will also help you get out of debt and put your finances on a stronger footing in every way.