How Long Does It Take to Establish Good Credit? (2024)

Are you starting college and ready to begin building credit in your own name? A newcomer to the countrywho wants to establish credit in the U.S.?Looking to kick-start your credit profile after not using any debt for six months or longer? Whatever your reason for wondering how long it takes to get acredit score, you can generally expect it to take about six months – and usually longer to get into the good-to-exceptionalcredit score range.¹

The better you understandhow credit scores are calculatedand used, the more evident it becomes why it takes six months. Lenders use your credit score to help them decide whether to lend you money. Specifically, credit scores are designed to indicate how likely it is that a borrower will fall at least 90 days behind on payments over the next two years. So lenders want to see more than a couple months of on-time payments – they want you to show that you can sustain that excellence.

Let’s explore how you can build good crediteffectivelywhile developing credit habits that help sustain high scores for the long run. Keep in mind that even if building a good credit score takes a while, it’s usually faster and easier thanrebuilding a scoreafter a mistake.

Once you understand the principles behind credit score calculations, you can begin working toward a good credit score with greater confidence. Although there are many credit scoring models, the two leaders are FICO and VantageScore, both of which issue scores ranging from 300 to 850. Scores above 670 are considered good to exceptional in the FICO model, which is more widely used by lenders.²

The algorithms for calculating your credit score are considered trade secrets. FICO shares the following general guidelines:³

• 35% is based on your on-time payment record.
• 30% is based on credit utilization.
• 15% is based on length of credit history.
• 10% is based on credit mix.
• 10% is based on recent borrowing inquiries.

Some of the best ways to build a good credit score are to pay your bills on time, keep your utilization low, and focus your efforts on a small and balanced portfolio of differenttypes of debt.

Although you probably can’t cut the time it takes to get your first credit score to less than six months, focusing on the behaviors that lenders want to see can help you get to a good or excellent score sooner than you might otherwise.

To get a good or better score:

• Pay your bills on time.Your payment history has the single greatest impact on your score, so it’s vital to make your credit card and loan payments by the due date.
• Use your card carefully. Keep your spending well below your credit limit – using less than 10% of your available credit, while maintaining other good credit habits like paying on time could benefit your FICO score, for example.⁴ But even lower utilization can help boost your score as long as you keep it above zero.
• Pursue variety.Creditors ideally want to see a mix of revolving debt, likecredit cards, and installment loans on your report to show you have experience managing different types of debt.
• Keepyour revolving accounts open. This process is about building history, so apply for credit cards you intend to keep.
• Apply carefully. Apply for a loan when you believe you have a good shot at getting approved. If you’re denied, you’ll have to apply again – and each application triggers a hard inquiry that will lower your credit score by a few points.

And try to avoid:

• Falling behind. Any payment more than 30 days late may be reported to the credit reporting agencies and could adversely affect your score. The later the payment, the greater the impact. Above all, don’t fall so far behind that your account is charged off or assigned to a collection agency.
• Overcharging. The more of your total available credit you use, the more likely it will impact your score. Maxing out your card – or even getting close – is a red flag for lenders.
• Closing accounts. Closing one account can reduce the average length of credit history of all your accounts. From a credit score perspective, it’s better to keep your account open.
• Applying indiscriminately. It’s not a good idea to apply for a bunch of credit cards just to see whether you get approved. It takes a few points off your score every time a creditor pulls yourcredit reportfor the purpose of making a lending decision.

Just as you can’t earn a grade without enrolling in a class, you can’t establish a credit profile without borrowing money. If you’re starting from scratch, you have several options:

• Get a standard credit card. Your strongest option is a credit card in your own name that isn’t tied to any collateral. But it may also be the toughest option because it’s hard to get credit without having credit. Still, you mayqualify for a cardwith a low credit limit if you’re a student, a credit union member, or have an established banking history, such as a checking account that you’ve had for many years and haven’t overdrawn.
• Get a secured card. Secured credit cards are easier to get because you deposit the equivalent of your credit limit with the card issuer. It’s low risk for the lender because if you default on your payments, it can keep your deposit.
• Become an authorized user. If someone you know already has established credit, you may be able to build your credit by becoming an additional card member on their account. Think carefully about this option – your behavior as well as the account holder’s will affect both your credit scores.
• Find a co-signer. Lenders may be more likely to approve you for a loan if someone with good credit agrees to accept responsibility for your debt should you default.
• Get a credit-builder loan. These loans are designed specifically to help people build credit but are usually far down the options list because you generally can’t access the money until after you’ve repaid it. The lender puts the borrowed money into a special account, where it stays until you’ve made all the payments. Those payments are reported to the credit reporting agencies and so help build your credit.⁵