Wanting to build credit for your dream home/ car/ apartment? Here’s everything you need to know about how long it takes.
How long does it take to build credit from 0?
The general consensus is that it can take around 6 months to build a credit score, according to Experian, one of the three major credit bureaus in America.
This is based on how long it takes to build a FICO score, which Experian claims is the type of credit score used by 90% of top lenders (more on what this means a little further down).
Building a good or excellent credit score can take even longer; even years. This is because a credit score is largely based on timely payments made over a long period of time. So it’s all about playing the long game. But there are tips and tricks you can use to speed up the process.
To understand how to build a credit score, you need to understand what a credit score is based on, and how it works.
How does a credit score work?
To put it simply, a credit score reflects how reliable you are when it comes to paying back money. This score is based on how timely you have been at paying the money back in the past.
This is how credits cores are judged, according to FICO:
- Poor: 300-579
- Fair: 580-669
- Good: 670-739
- Very good: 740-799
- Excellent: 800-850
Although at this point, it would be understandable to believe these are just random numbers generated by a squirrel in a box pressing buttons, FICO does reveal that there is anon-squirrel-related method to the process.
It is based on several factors:
- 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.
How to build credit fast
In the short-term, there are a couple of things that financial bodies, such as American Express, suggest you can do to help your credit score along the way.
#1 Pay your bills on time. It may seem small, but since the majority of your score is based on on-time payments, this is the best way to start. Scroll down for hacks on making this happen.
#2 Monitor your credit report. You can request one free copy of your credit report per year from your credit bureau. If you find any errors, dispute it with each creditor that reports it on your list.
If you’re interested in more ways to build your credit fast, we have a whole article on it.
Where to start building your credit
There are multiple tools you can use to build your credit.
Here are the ones you’ve probably heard of:
- Using a secured card to build credit. With these types of cards, you pay a security deposit which then becomes your credit limit.
- Using a credit card to build credit. The obvious choice. But there are many reasons why you might have to avoid credit cards; such as, if you have a poor credit score, (between 300-579), the annual percentage rate (APR) will be higher.
The Credit Builder Card*. Cleo keeps it simple:
💙 There’s no interest
💙 No credit checks
💙 The amount you add to your security deposit becomes your credit limit (there’s a minimum deposit of $1)
💙 You spend the money on the card, and with autopay, you repay it automatically
💙 Cleo reports your payments to credit bureaus and (if they’re on time) you start building credit
More on how the Credit Builder Card* can help you
Ok. Here’s the breakdown of how it works:
💵 Add some cash to your security deposit: the amount of money you put in your security deposit becomes your credit limit
➡️ Go shopping. Use your card at least once a month, and then pay back the balance (with autopay, this happens automatically)
➡️ Add bills or subscriptions so you drop the life admin and spend automatically. Killing two birds with one stone. You can also set up bill reminders and factor these bills into your Cleo budget.
➡️ Keep track of your credit score in the ‘borrow’ tab. Here, you can see how it’s changing month on month.
Ready to give Cleo a try?
• You’ll be able to apply for the card once you sign up for the Cleo Builder subscription, which is $14.99 per month
• With the Builder tier subscription, you’ll have the option to apply for a cash advance of up to $270* (eligibility requirements apply)
• Cashback rewards** (get money back when you spend at some of your fave stores)
• Priority support to help you on your credit journey
• On top of this, you get access to all of Cleo’s free features
Enjoy this post? Def give it a share or send it along to a friend. You never know, it could make a big difference.
Big love. Cleo 💙
*The Credit Builder Card is issued by WebBank, Member FDIC pursuant to a license from Visa USA Inc. Access to the Card is subject to approval.
**“Cash/Salary Advance” and “Cashback Rewards” are features of the Cleo Builder Subscription and not the Credit Builder Card. The “Card Cash Advance” is a feature unique to the Credit Builder Card and allows you to advance cash at an ATM. The Card Cash Advance is subject to a $2.50 fee per transaction plus any fee that may be charged by the ATM or Bank. This feature is only available to holders of the Credit Builder Card.