Your credit score is a sensitive number—three digits that can move up or down on any given day depending on how the information in your credit report changes. If you’ve been working to improve your credit score—by paying off past-due accounts, correcting errors, making timely payments, or having negative items deleted from your credit report – you undoubtedly want to see the results of your efforts as quickly as possible.
I’m not going to mince words: building credit is a long process. It takes time and dedication—years, even—to build good or excellent credit. It won’t happen overnight, but it will happen. As long as you cultivate and stick to the right habits, you’ll be able to pull up your score.
Why is it so easy to destroy credit?
Credit scores take years to build up and only a few small mistakes to destroy. Keeping your credit score high can help you to get better interest rates on loans and mortgages, can help you rent an apartment or a house, and much more. The surest way to kill your credit rating is to not pay your debts on time because that history will show for 6 – 7 years on your credit report. All credit bureaus keep perfect records of every payment that is made on time and everyone that is late. A few payments that are on time don’t make up for one that is late
If you run your credit cards to the limit, it will ruin your credit rating. It is always surprising how many people think they have good credit because they pay all of their bills on time, yet their credit rating is horrible because they have maxed out all of their credit cards
Unfortunately, it’s much harder to build good credit than it is to destroy it. While it takes three to six months just to accrue enough information in your file to be issued a credit score, it can take much less time to reduce it.
You can also add a little bit more to your credit file by getting an installment loan. In fact, did you know that student loans are installment loans? Additionally, you can get a personal loan and pay it off in installments.
Essentially, diversity of credit makes a significant positive difference to your score. And having a small personal loan, on top of a credit card, can be a great way to build good credit from scratch.
Another way to pad your thin credit file and build credit faster is to have yourself added as an authorized user to someone else’s account. You can only do this if you have a close relationship with the account owner, so this strategy works best with a parent or a spouse.
Age matters for credit scores
There’s one thing that borrowers with great credit scores tend to have in common and younger borrowers lack longevity. The longer you have open accounts, the longer you have built up credit, the better your credit score.
Keep accounts open — even ones you seldom use — so lenders can see your good borrowing behavior over time. Pay your bills punctually and use less than 30% of your credit limit.
How often does my credit update?
Once you have opened a credit card or installment loan, it takes approximately 30-45 days for the creditor to report the account to Experian. Typically, an account is reported at the end of the first billing cycle after your first payment is due.
The good news is that it doesn’t take too long to buildup a credit history. According to Experian, one of the major credit bureaus, it takes between three and six months of regular credit activity for your file to become thick enough that a credit score can be calculated. Building credit is a lot like losing weight. There’s a lot more to it than just flipping a switch or pressing a button.