Credit scores are no easy hurdle to jump. They help you rent an apartment, sign a lease on a new car, and help you buy a new phone. With older folk with more decent credit, applying to any number of applications might seem like any easy task. However, with newer people, things such as student debt or maxed credit cards can cause serious penalties on your score limiting you from applying to anything.
According to a study, nearly 75% of graduating students could not apply for housing due to student loan delinquencies and were not able to reach the required credit until up to 2-3 years later. Overall, credit is not something to be taken too lightly but we’re here to answer your questions like what is a credit score, what kind of people need to build credit, how long does it take to build credit, and how to improve your score.
What is a Credit Score?
Like we discussed before, your credit score is what determines you for apartment rentals, car leases, and much more. But what exactly is it? How long does it take to build credit? What gets me these scores? A credit score is a number composed of 3 digits, usually on a scale of 500-800, that is based off an algorism evaluating your risk to a lender.
Think of it like this, the faster you pay back loans or credit cards, the happier your lender will be and not only increase your score but it will make the lender happier and lead you to better offers. The less you pay back and the more delayed your payments are, the worse your score gets and the harder it gets to work back up.
Who Needs to Build Credit?
Everyone needs to build credit, but especially college students. Dealing with debt from student loans can cripple your score and can seriously limit your financial possibilities. One of the best ways to work on dealing with the situation of poor credit is to visit a local credit union to work out your options.
The second most at risk people for bad credit are parents. Helping your kids just wasn’t enough. You have to be hit with bad credit too. Remember, the more co-signing you do can also cripple your score which can cause lenders to back off and could financially cripple your interests.
How Long Does It Take to Build Credit?
It can seem like a daunting and almost impossible task, but you can rebuild your credit with just a little bit of time and energy. You are working not to improve your credit score, but to improve your credit history which then reflects in your score. The amount of time it takes to rebuild your credit history depends on the type of negative mark that affected it in the first place. This can include a delinquent account or an account in collections.
Exactly how long does it take to build credit history? Each negative mark has its own lifespan. Delinquent marks will remain on your credit report for seven years. Bankruptcies and other public record items will stay on your report for between seven and ten years. Credit inquiries stay on your report for two years. If you work hard and make a serious effort, your credit score will increase in no time at all.
5 Tips For Improving Your Credit Score
1. Keep an Eye on Your Credit Report
In order to improve your credit score, you will need to periodically check your credit report. This will allow you to understand your score, check for errors, and make a plan. You are allowed to request an official report from each of the big three credit reporting agencies once a year. You can also sign up for a free online credit checking service, like Credit Karma. Beware of websites that ask you to pay a monthly subscription fee.
2. Pay Off Debts
This is easier said than done, but the faster you pay off your debts, the faster your credit score will improve. Stop using your credit cards. Check how much you owe on all of your accounts and create a payment plan to reduce all of your debt.
3. Always Pay Your Bills on Time
Making your payments on time is one of the biggest contributing factors to your credit score. Even paying your bills a few days late can have a negative impact on your score. Do your best to pay all of your bills on time, every time.
4. Set Up Payment Reminders
To help you stay current with all of your accounts, consider setting up payment reminders. Some banks offer reminder programs that will send you a text message or email when a payment is due. If you are very forgetful, most billers offer auto debit programs where they will automatically take the minimum payment straight from your bank account.
5. Apply for New Credit Lines Only as Needed
Choosing to open a new line of credit will often not improve your score. In fact, if you asked now how long does it take to build credit, the answer would be a lot longer. It may be tempting to apply for a new credit card to open more available credit or create a better mix of credit. This will most likely cause your score to go down. For new credit users, this can be especially risky as opening new credit accounts rapidly can lower your score and make you look worse to potential creditors.
Now it’s up to you! You have answered the question of how long does it take to build credit. Take this guide, follow it, visit your local credit union, keep track of your goals, and kick credit in the butt. Everyone knows how discriminating 3 numbers can be, but sooner than later you are going to be flashing around an attractive 800 credit score. We all start off small but it takes honest hard work and dedication to make achievements. If our tips helped you, feel free to comment below. If you have extra credit building tips feel free to comment below!