Your credit rating is one of the most important numbers attached to you. It dictates what you can buy, how much money you can borrow, and more. But how long does it take to get good credit to where you can get these things?
On average, you will generally start to see improvements in as little as six months. But you must remain consistent in your endeavors. In doing so, you can build good credit sooner rather than later.
And once you attain good credit, the sky's the limit. If you're not familiar with the perks of having good credit, stick around. We'll share some wonderful benefits, as well as tips on how to build credit from nothing.
How Long Does It Take to Build Good Credit?
The credit rating game is an important one to play if you want to get a mortgage, buy a house or car, and enjoy nice things. Having good credit is an essential step for anyone who wants to be financially successful.
But what does it take to have good credit? When do you even start building your credit rating? How does it work? If you've ever asked these questions, then you're on the right track. Recognizing that you need to take action to improve your credit score is the first step towards success.
On average, you can expect to start seeing results from your actions within six months. And the more you continue to work on raising your credit score, the better it will get. Just remember that poor financial decisions will negatively affect your rating and work against the good things you do.
Your credit score is just one way to measure your financial health. It isn't the only thing that lenders use to determine if you're a good or bad risk, but it does play a very important factor. A credit score ranges from 300 to 850 and determines the interest rates you'll pay on loans and lines of credit, as well as what's offered to you by banks and other financial institutions.
One of the most important things to do is understand how your credit score is calculated. You may find that you're surprised at some of the factors that affect your score. For example, if you pay your phone bill late or miss a payment on your car insurance, this could negatively impact your credit score.
When you know how credit works, you will find it's easier to do things in its favor rather than against it. Of course, working your way up from a credit score of 650 is going to be easier than working your way up from a 300. But in both cases, diligence and dedication are necessary to get results.
You may be saying to yourself that it's all well and good if you have credit, but what happens if you don't have any? Can you build credit from nothing? And if so, how long does it take? Let's continue on to find out.
How Long Does It Take to Build Credit from Nothing?
When you're working with no credit, the time it takes to build can be slightly less than if you have a bad credit score. Oftentimes, you can see results in as little as three months. But just to be on the safe side, expect it to take between three and six months.
Many people get discouraged when they don't have established credit. But as you can see, it can sometimes be easier and faster to build up good credit on absolutely nothing. Just keep in mind that you must stay committed to the cause. The more effort you put into building your credit, the more you will get out of it.
How to Build Credit
Now that you know how long of a time period you're looking at to build up your credit rating, it's time to make a game plan. By following these tips, you can start to build or rebuild your credit to where it's in good standing.
Similar post: How Long Do Late Payments Affect Your Credit Score?
Get a Credit Card
The easiest way to build your credit score is by getting a credit card. Some people are apprehensive about getting a credit card because they fear that it will lead to debt, but this isn't the case if you're responsible with your spending.
You can use a credit card responsibly and pay it off in full every month. And luckily for you, there are many different types of cards that offer incentives like cash back or travel rewards. Applying for a card is easy and won't take much time at all.
It usually takes about 15 minutes to apply for a new account, and after that, it will take about one month before you see your score change. You can start by applying for a store-based card from brands like Target, Walmart, or Home Depot.
These cards typically have manageable interest rates and require no deposit. After you've been approved for one of these cards, it's very easy to get approved for other types of cards from more prestigious banks or companies like Chase or American Express.
These accounts typically come with higher interest rates and may require an initial deposit, but they also come with better perks like travel rewards and loyalty points.
Pay Your Credit Card Bill on Time
One of the most important things you can do to build your credit score is to make sure that you pay your credit card bill on time. The best way to do this is to sign up for auto-pay so that you don't have to worry about forgetting to pay your bill when it's due.
Remember, late payments hurt your credit score, so it's important to take steps to prevent this from happening if you think you'll forget. This will ensure that you never miss a payment and will show potential creditors that you're a responsible borrower.
It's never a good idea to ignore negative marks on your credit report. So if you already have missed payments on your report, speak with a credit counselor or financial coach who can help you work through these issues and get back on the right track.
Check Your Credit Report and Scores
The first and simplest way to build your credit score is to check your credit report and scores. Your credit report details your financial history, your current balances, and how you've paid off past loans.
Checking your credit report and scores every six months can help you identify any issues that need to be addressed, as well as any inaccuracies that might need to be corrected. Many people are under the false impression that credit bureaus don't make mistakes. But the truth is that they do.
However, it's up to you to identify any mistakes or errors and take action to get them rectified. Unfortunately, they won't come to you. But the sooner you take action against errors, the sooner you can achieve your goal of good credit.
Ask For a Credit Limit Increase
Before you can build your credit score, you'll need to establish a credit history by opening up lines of credit and using them responsibly. One strategy that can help you build your credit score is asking for a credit limit increase.
If you want to make large purchases in the future and you know your income will support it, ask for an increase in your current line of credit. This will show lenders you're willing to take on debt and pay it off responsibly.
If you don't have any lines of credit or if they're maxed out, then there's no way for your lender to see that you're capable of taking on new debt responsibly. To get around this, some people open up a new line of credit with a small balance that they use once or twice before paying off the balance.
This way, the consumer is able to show their ability to take on new debt while also showing they can pay it off responsibly.
As you can probably tell by now, there's a theme when it comes to improving your credit standing: action. Taking action is the best way to ensure that you're doing what it takes to build good credit. And only you can take action to turn around bad credit and work toward a strong rating.
When you know what you're up against, it's much easier to create and maintain a plan to build your credit. Whether you have bad credit or no credit, you aren't without options to make improvements. The key is to not get discouraged. But you also have to remain diligent in your plan to achieve good credit. In doing so, you're likely to see positive results from your actions.
Additional reading: Does Paying Rent Build Credit?
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.