Regardless of bankruptcy or starting to build credit, time for this process is the topic that everyone wants to know to draw a smart strategy for their credit. Here is all authentic information from Hanfincal on how long does it take to build credit from nothing? Let’s get started now.
1. How long does it take to build credit score?
It takes three to six months to build your credit, depending on the range of credit score you are looking for.
It may take longer if you’re starting from scratch, but you should see significant improvements within six months. Suppose you have no credit history and obtain your first credit card or loan from a lender. In this case, after reporting to the three major credit bureaus, it will take approximately 1 to 2 months to obtain a VantageScore® and around 6 months to obtain a FICO® Score.
2. How long does it take to improve your credit score?
The time it takes to improve your credit score is determined by how low your score was at the start and how many scores you want to raise. Here is a typical time frame for increasing your score to a good range for various reasons.
- Applying for new credit: It takes about 3 months to improve your credit score.
- Maxing out a credit card: It takes 3 months as well.
- Closing an account: It takes about 3 months.
- Missing a payment: It takes 1-2 years to recover your credit score in this case.
- Bankruptcy: The time is longer in bankruptcy, about 7-10 years, based on Chapter 13 or Chapter 7.
Plus, if you are preparing to apply for a loan for an emergency purpose, this fastest way can help you boost your credit score immediately and totally free. Does that sound amazing? One more good news is that you can get these free scores through an online center in just a few minutes. Don’t skip this incredible chance. It’s time to raise your scores now.
3. How long does it take to build credit from nothing
Here are 5 ways to build credit from nothing:
3.1. Get a credit card
Getting a credit card is the quickest and most effective way to build credit from nothing. This is also a popular option among many Americans.
However, it is understandable that not everyone with bad or no credit can meet the requirements of a regular credit card. What do I do now? If you cannot get a “regular” credit card, you can apply for a secured credit card. It is easier to obtain because it requires a security deposit and does not allow you to exceed your spending limit.
Don’t worry that using a secured credit card will not help you rebuild your credit. Because your information is reported to credit bureaus, which record any of your credit actions, this card can help you build credit faster.
Both FICO® and VantageScore place a high value on payment history and the amount of credit you use. As a result, every time you make an on-time credit card payment and keep your outstanding balance below 30% of your available credit, you create positive information for your credit report.
The next step in improving your credit score is to become an authorized user. If you know someone with good credit, ask if you can be added as an authorized user on their credit card. In this role, you can benefit from their long credit history and many types of credit on your report, both of which can help you build credit.
Being added as an authorized user can also shorten its time to generate a FICO score if the account is more than six months old.
3.3. Use a credit-builder loan
A credit-builder loan is another option for quickly increasing your credit score. What exactly is it, and why can it do this? A credit-builder loan is a small, short-term installment loan designed to assist you in establishing credit. A lender deposits the loan amount into a secured savings account until it is repaid, rather than giving you a sum of money to spend.
Your lender will usually report this information to the credit bureaus as you make loan payments. The funds in the secured savings account are released to you when the loan term expires, minus any fees.
3.4. Understand the credit score calculation
Understanding the credit score calculation is essential in determining which field you should focus on more. Taking advantage of the most important factor accounts for the greatest percentage of credit score. Here are five factors that can help you improve your FICO score:
- Payment history (35%): One of the most critical factors in calculating your FICO score is your payment history. Make on-time payments to build a positive credit history.
- Utilization ratio (30%): You should keep your credit utilization ratio under 30%.
- Credit history length (15%): This factor considers the average age of your accounts.
- Credit mix (10%): Having various types of credit accounts can improve your credit score.
- New credit (10%): Don’t apply for too many credit accounts at once. A hard credit check is usually required for new credit applications, which can lower your credit score by five points.
3.5. Practise good credit habits
Developing good credit habits is a long-term way to improve your credit score. There are numerous healthy financial habits, as listed below:
- Understand your position: Check your credit report and score regularly to determine how many scores you have and any errors on your reports, allowing you to find the best and most immediate solution.
- Use your card with caution: Keep your spending well below your credit limit – it is recommended that you use less than 30% of your available credit.
- Pay your bills on time: Because your payment history impacts your credit score, you must make your payments on time.
- Create a credit account: Make yourself an authorized user, get a secured credit card, or get a credit-building loan.
- Mixed credit: Creditors prefer to see a combination of credit cards and installment loans on your credit report.
- Perform some credit report cleaning: Many credit reports contain errors, so dispute them to easily improve your score.
- Maintain your accounts: This is a history-building process, so only apply for credit cards that you intend to keep.
- Apply for new credit only when necessary: Begin with a few accounts and manage them responsibly for a year or two before adding more.
- Apply with caution: Apply for credit only after thoroughly researching the terms and potential benefits and believing you’ll be approved.
4. Things to avoid to protect your credit
Aside from what you should do, here are four things you should avoid to protect your credit:
- Account closure: Closing one account can reduce the average length of credit history for all of your accounts. If you close your accounts, you will lose 15% of your score.
- Overcharging: This is never good for your credit or financial health. The more of your total available, the lower your credit score.
- Applying indiscriminately: Applying for many credit cards just to see if you get approved is not a good idea. This is a time when hard inquiries can harm your credit score.
- Falling behind: Any more than 30 days late payment will be reported to credit agencies, likely lowering your score.
5. Why should you maintain a good credit score?
Once you’ve established that credit, it’s critical to maintain it so that you don’t end up destroying everything you’ve made every effort to build. Building and maintaining good credit is critical to your long-term financial health if you want to borrow for large purchases such as homes and automobiles.
How long does it take to build credit? It is not too long and too hard to start building your credit from fair, poor, or even zero. If you have strong motivation and follow all credit card issuers’ requirements on payment history, utilization ratio, etc., you can boost your credit score as soon as possible. Plus, if you have any concerns and questions about credit topics, let Hanfincal know through our social media. We always appreciate your thoughts.