The sooner you establish your score, the sooner you can borrow money, apply for exclusive credit cards, and qualify for discounts. It’s easy to improve a good credit score just as it is to worsen a bad one.
But how long does the process take? And how can you benefit from it?
To get straight to the point, you don’t get any immediate benefits from improving your score. But when it comes to the future, it offers invaluable privileges.
I like to see it as insurance. If you had an accident yesterday, you can’t buy insurance today and expect them to cover that. They can only help you with future issues. That’s what you should expect from your credit score.
That doesn’t mean it has no worthy benefits. But because it takes a long time to build, it’s not worth it unless you start really early. Yet, it’s never too late to build your credit score.
This article will explore how long it takes to:
- Build your credit score from nothing to something
- Reach a good credit score (661-780 FICO)
- Achieve excellent scores (800+)
- Secure your score so that you don’t lose it on a single mistake
- Remove mistakes and fix your score asap
We’ll also mention how to keep that score later. You wouldn’t call it a success if you lost what you worked so hard to achieve.
How Long Does It Take to Establish Credit Score?
This section assumes you’re an average person with no debt, no failed payments, and no penalties of any kind. Maybe you never borrowed money and don’t know if you even have a score.
Callout: If you’re more interested in recovering your score, jump to the next section (Managing Your Credit Score Risks).
The main concern is: I have no score. What do I do, and how long does it take?
Building Your Credit Score
Well, here’s the catch 22: you need to use it to establish credit, either by borrowing or opening a credit line. BUT you need some credit score to do that.
Yes, banks and lenders need your score to make sure they can trust you with money. But if we exclude this group, there are still services willing to work with you. It won’t be the best deal, but it allows you to build the score.
Mind that you need a minimum of six months before the credit bureaus register your activity. Until then, it will show that you don’t have enough history.
Now, that doesn’t mean your history length can’t be under six months. If you open dozens of credit lines this month, your history is the average length of all of them. That’s why it’s recommended to open them as early as possible.
Getting a Good Credit Score
You don’t start from 300 when you establish your credit score. Once you have enough history, it calculates based on your financial decisions, no matter how little money you move.
It’s easier to get a good score if you never had any. It’s harder when you already have penalties. If you don’t, you can raise it as much as 100 points every 45-60 days.
So to get a good score (around 700 points), it takes three to six extra months. Within six months to a year, you can go from having no score to having a good one.
- By applying for loans and credit cards
- By managing more debt and paying it back on time
- By keeping a low credit utilization rate (or increasing your limit)
Two things will stop you from getting an excellent score, however: hard inquiries and history length.
Getting an 800+ Credit Score
A good credit score is enough for most people to get fair deals. But if you want the best discounts and privileges, you need to be a bit more patient. Here’s what the general requirements look like:
- Make your minimum payments 99% of the time
- Keep your credit utilization rate below 30%
- Keep your credit history length for 7-9 years or more
- Have 11 to 21 lines of credit (either closed or opened)
- Ask for credit once a year or less (aka Hard Inquiries)
As you can see, it’s going to take a long time to get close to the perfect score. Is it worth it? If you have the patience, it is. But if you don’t (and you have a good score already), you’re not missing out much.
Here’s the difficulty:
You need a history length of 7-9+ years (anything less than 5 is bad). But you also need about 21 credit lines.
- If you have a single credit line with 5 years of history and you open a new one today, your average history is now 2.5 years.
So you need to open those accounts early. More lines increase your utilization limit but also causes two problems.
Every time you open a line or ask for credit, that’s a hard inquiry that lowers your score. It impacts you for 12 months and drops off after two years.
But if you were to keep 20+ credit lines, that’s an insane amount of payments you have to keep on track with every month. In that sense, making more payments is good, because it makes your missed payments less noticeable.
Luckily, you can close those accounts while still showing them on your report, so you barely have to pay anything.
Expect seven years to get close to an 820 FICO. That’s assuming you open all the credit lines today and don’t miss a single payment.
As an added difficulty, you also need to educate and protect yourself from identity theft scams. It’s too easy to fall for these, and once a scammer has your bank account, they can ruin years of score building on a whim. Also, beware of services offering credit score repairs.
Managing Your Credit Score Risks
It takes patience to build the best credit score. You can’t just leave it on autopilot for the next decades. It’s the result of making the right financial decisions for years and rarely falling behind.
While it’s possible to boost your score fast, that doesn’t mean it’s easy to keep. It’s impossible not making mistakes unless you use a system to organize.
How To Protect Your Payments Ratio?
- Allow your credit lines to charge you the monthly payment automatically
- Open all those lines now, so you don’t need to make hard inquiries in the future
- It’s better to borrow a bigger amount once than borrowing twice
- Set spending limits to keep yourself below the recommended utilization rate
- If you’re worried about scammers, file a credit fraud alert to tighten your security
- Closing accounts is probably a bad idea. Downgrade or suspend them instead
- Break down your payments as much as you can
Your biggest risk is missing a payment, which determines 35% of your FICO score. To prevent this, you want to:
- Break down the payments you know you can pay
- Compress/consolidate the ones you’re likely to miss
For example, you have to pay $100 every month. Let’s say you paid for the last nine months, but you can only afford $50 on the tenth. So if you miss this payment, it means you paid on time 9 of 10 times. Credit bureaus consider bad a ratio under 97%, but this one is 90%.
What if you could break it down into payments of $50? Two payments per month (20 in total). That means you paid 19 out of 20, which is 95%. Still terrible, but better.
Here’s the strategy:
- $100 for 10 months is $1000, but you can only afford $950
- Let’s say, hypothetically, that you can break down these payments into just $1. That’s 100 payments of $1 per month
- For the amount you can’t pay (50 payments of $1), you’re going to consolidate it into one of $50
How many payments do you make? 951.
How many do you miss? 1 out of 951.
What’s your payment rate? 99.98%.
You didn’t pay anything on top, and you just saved yourself a lot of money.
Of course, it’s not that simple. More payments mean more interest. What matters is that you get the idea.
As a last tip, remember that you can take credit for your credit to avoid missing a payment. It’s more interest-expensive but protects your score.
If you’d like to learn more about debt consolidation, go here.
How To Protect Your Credit History Length?
Your credit history stands for the second largest factor (about 30% of your score). And the math it follows is similar to the previous one: the higher the quantity, the better.
Let’s keep it simple:
- One credit line will determine 100% of your history length
- With 2 credit lines, each determines 50% of your average length
- With 3 lines, it’s 33% each
- With 10 lines, it’s 10%. With 20, it’s 5%
For every credit line that you add, you’re reducing how much the next line will affect your score. So if you open your eleventh, it will affect less than 5% of your history length. Because your credit length is 30% of your score, 5% of 30% is 1.5%. Your score drops by 1.5%.
What if you’re opening your second credit line only? That drops it by 50%. 50% of 30% is 15%. That might be as much as a 100-point drop.
Luckily, your length always increases over time.
Your utilization rate also increases whenever you open a new credit card. If one account allows for $3,000 a month, ten accounts make $30K. Since your rate should be below 30%, you can borrow about $9K split into ten payments of $900. And as mentioned, ten payments are better than one.
You can go ahead and open 10-20 lines this year only if you’re okay with dumping your credit history length for a year or two. If you can afford it, doing it will help you in the long run. FYI, most minimum payments range from $25 to $50 per month.
Sounds too expensive? If you rarely need financial help, maybe getting an excellent score isn’t that relevant to you.
How Long Does It Take To Fix Your Credit?
It depends on where you made the mistake.
- Did you miss too many payments?
Then you need to make more (even if they’re small) and consolidate your debt. It may take a few months.
You can fix your score at the cost of losing money. You need to take some steps back to move forward if that means taking a bad interest rate on the only loan you qualify for.
- Did your credit history length fall too much?
This is a tricky one. The credit bureaus consider it “Good” to have over five years on your average history length. If you had a single line and opened ten new ones, you’re going to throw away most of the history you earned so far. And your history length affects twice more than your number of credit lines.
But hey, credit scores are that important until you give them a use. So before you add credit lines, remember that your credit score will drop for years. Accepting that fact, make all your big purchases before you apply.
They also penalize you for having too few credit lines, so this is something you have to do.
- Don’t you have enough credit lines?
Then, open as many as you can afford. If you can’t justify spending that much per month, start by opening three to five every year. After you gather ten, you can open a new one every year or two. Because it counters with the history length you get, your credit score will barely change.
Hard inquiries aren’t a big deal, but they limit your credit score for twelve months. If you need your credit score for a loan, mortgage, or any big purchase, do it before the inquiry.
Because it affects your history length, it will take years to recover.
- Is your utilization rate too high?
You can boost your credit without reducing your spending by opening more credit lines. Each line has its credit limit. So if the provider doesn’t allow you to increase it, you just register a new one. Your score may recover within a year.
If you follow the guidelines to improve your credit score, banks will gradually allow you to access more money.
What To Expect?
It takes about six months for the credit bureaus to establish your credit, another 3-6 months to get a good score, and over seven years to achieve exceptional marks. It also takes seven years to clear your credit reports, which is how you get rid of mistakes from the past.
There’s very little you can do to erase financial mistakes. You can only make better decisions and hope that your wins outweigh your losses.