How can you improve your credit score quickly? If you need to borrow money but have poor credit — or no credit score at all — you may feel like an eternity before the number is acceptable to lenders. However, with positive changes in your credit management habits, you can notice improvements in your credit score in as little as one month.
But exactly how long does it take to repair credit or even build credit from scratch? Here’s what you need to know.
How long does it take to build credit from nothing?
There are several reasons why you may not have a credit score. First, you may not have any experience using credit yet; If you haven’t opened a credit card or taken out a loan in the past, you have what’s known as a “thin credit file.” This means that there is not enough information available to establish a credit score for you. This can also happen if it has been a very long time since you last used the credit, or if you are a new immigrant to the United States or have been widowed or recently divorced.
This might make you wonder, how long does it take to build a credit score? At the very least, it will take six months to create a credit score from nothing. FICO, the credit score company, requires that you have at least one credit account that has been open for six months or more and at least one account that has reported activity to credit agencies within the past six months. It is possible for a single account to fulfill both of these requirements.
The third requirement for FICO to establish a credit score is that there is no indication in your credit reports that you are deceased. This may sound strange, but it can happen if you share an account with someone who has been reported dead. If you meet all three requirements, you should earn a credit score within six months. Then you can work on the next step – improve your score.
These are the FICO score ranges:
- Weak: 300-579.
- Adel: 580-669.
- Good: 670-739.
- Very good: 740-799.
- Exceptional: 800-850.
Tayne, a debt settlement attorney at Tayne Law Group in New York and author of the money management book Life and Debt.
Good credit depends on several factors that have to do with your behavior as a borrower, which makes it difficult to set an accurate timeline. However, in order to build good credit as quickly as possible, you should focus on the most influential credit score factors.
“When you’re first building credit, it’s important to start in full swing, so make sure you can make all of your payments on time each time and try to pay off your balances in full,” says Tayne. Overextending yourself off the bat will only prolong the credit building process.
How long does it take to improve your credit score?
Let’s say you have a credit score, but it’s not in good shape. The question now is, how long does it take to get good credit? A schedule can be tricky to improve a bad credit score. It will largely depend on how bad your credit starts. “If you’re dealing with some serious damage, it can take several years to rebuild it,” says Tyne.
For example, serious negative labels such as a collection account, foreclosure or bankruptcy will remain on your record for about seven years. However, its effect will wear off over time. A group account that is five years old, for example, will pull your score much lower than an account that is only five months old, according to FICO.
Here’s a look at how long it typically takes to fully recover from various negative credit actions, according to VantageScore data. (VantageScore is the other major credit score company.) Keep in mind that payback times should be similar to FICO scores, since VantageScore and FICO use similar credit scoring parameters.
The good news is that when your score is low, every positive change you make is likely to have a significant impact. For example, going from a poor credit score of about 500 to a fair credit score (in the 580-669 range) takes about 12 to 18 months of responsible use of credit.
Once you reach the good credit zone (670-739), don’t expect your credit to continue to rise steadily. “It can be difficult to improve your score the higher you get,” says Tyne. “Once you’re in the 700 to 800 class, you’ve established very good credit habits, and as such, it can be difficult to take action that will fundamentally change that — you don’t have much room for improvement, so for that to speak.”
On the other hand, it’s a lot easier for your credit score to drop out of a category once you’ve earned a solid score, so maintain these good habits.
The fastest way to improve your credit score
Whether you’ve never had a credit score before or you want to improve your score, there are steps you can take to increase your credit. It may seem confusing, but tackling one area of focus at a time can help you see continued improvement.
“There are a lot of moving parts in your credit score, which means there are a lot of opportunities to improve your score,” says Richard Best, a personal finance expert at DontPayFull, a money management and education site. In fact, some of these strategies can help you see an improvement in your score in as little as 30 days. Here’s what you can do:
- Know your position. You can’t improve your score if you don’t know what it is. To see if you have a credit score, check if you have credit reports registered with credit bureaus. By law, you are entitled to a free credit report from each of the three major credit reporting agencies once a year through AnnualCreditReport.com. Due to the coronavirus pandemic and the financial turmoil people are experiencing, you can get free reports weekly until April 20, 2022. However, credit reports do not show your score; To find out your actual credit score for free, you can check with your credit card company or free consumer services.
- Create a credit account. If you don’t have a credit score yet, you’ll need to get a credit card and start building one. Of course, that could lead to a chicken and the egg scenario – how do you get credit without a credit score? Fortunately, there are ways. For example, try having a family member add you as an authorized user on one of their credit cards. You can also open a secured credit card, which is designed for people with poor credit or no credit, or take out a credit generator loan.
- Do some house cleaning with a credit report. Many credit reports contain errors such as missing accounts, incorrect credit limits, and even wrong Social Security numbers, which can lead to lower scores. By law, credit bureaus must correct errors, Best says, so object to errors in order to easily improve your score.
- Reduce your use. One of the quickest ways to increase your credit score is to reduce your credit utilization ratio. You can do this by paying off an existing debt, ideally less than 30% of your limit, although any reduction in your outstanding balance helps. The other option is to request an increase in your credit limit. The key here is that you can’t accumulate more debt either, or else your ratio won’t improve.
- Make each payment on time. Payment history is the most influential factor in your FICO score, so having no payments is one of the easiest ways to dip your balance. Making an effort to pay bills in full and on time will have the opposite positive effect. “As your reported missed payments go down in history, your score will gradually increase,” Best says.
- Apply for new credit in moderation. Finally, it may be tempting to apply for more credit to boost your score, but it can go too far. “You will slow the growth of your credit score by trying to open (too many) new credit accounts,” Best says. Start with just two accounts and manage them responsibly for a year or two before taking on more.