How Long Does It Take to Build Credit From Scratch?

Everyone starts out with a blank slate when it comes to their credit reports. The trick, of course, if you have never established any type of credit, is to learn how to go from “no credit” to “good credit” in the shortest amount of time possible.

How long does it take to build credit? Establishing a good credit history doesn’t happen overnight, of course. But with the right strategy, you can certainly expedite the process.

You Don’t Start from Absolute Zero

A common credit myth is that your credit scores begin at zero. However, FICO scoring models and the current VantageScore model are scaled on a range from 300 to 850. There is no such thing as a credit score of zero, despite what some financial celebrities love to suggest.

All credit scores are generated based upon the same information, and that is the data contained in your credit reports. If your credit reports are still completely empty, then no scoring model will be able to generate a credit score for you. In the credit scoring world this means that your credit does not meet the minimum scoring criteria. Until your reports meet this minimum scoring criteria, you simply will not have any credit scores at all.

Building a Credit Score

Becoming eligible to earn credit scores means that you must first add items to your credit reports which are scoreable. In other words, you need to establish credit. However, establishing credit for the first time can be a bit challenging. Many lenders will not wish to do business with you because they may feel that being your credit “guinea pig” is too big of a risk.

Fortunately there are several methods available to help you establish credit from scratch even if you’re currently void of a credit report.

1. Secured Credit Cards

Perhaps the most popular way to build credit from scratch (or even to try to rebuild damaged credit) is to open a secured credit card. A secured credit card represents very little risk to the lender, because you’ll be required to place a deposit with the issuing bank equal to the amount of your credit limit. For example, if you deposit $500, you’ll be issued a card with an equal limit of $500.

Because of the much lower risk involved for the lender, secured credit cards generally have easy approval criteria. This means the bank may likely be willing to take the small risk and issue an account to you even if you have no previous credit history. Of course, it’s up to you to make sure you manage the new account properly (that means no late payments and paying off the balance monthly), otherwise the account you opened with the intention of helping your credit could have quite the opposite effect.

2. Credit Builder Loans

Another effective method for establishing credit without any previous credit history is the credit builder loan. These loans are generally issued by credit unions and can serve as an easier way to qualify for an installment line of credit. Since credit scoring models reward consumers who show a history of managing a variety of account types well, it could certainly be advantageous to open both a secured card and a credit builder loan when setting out to establish some credit for the first time.

With the credit builder option, you will be issued a loan for only a small dollar amount, perhaps $500 to $1,000, but the funds will not be released to you immediately. Instead, the funds will be held by the credit union in a savings account, and only after you have completed all of your loan + interest payments will you have access to the funds. You might think of these loans as a forced savings account. Assuming you make all of your monthly payments on time, you could have six to 12 months of solid payment history added to your credit reports by the time the loan has been satisfied in full.

3. Authorized User Accounts

Authorized user accounts represent another great way to establish credit for the very first time. With this credit building method, a family member adds you to an existing credit card account as an authorized user. As long as the account has good payment history and a low balance, the card will likely start you out with a relatively impressive score as soon as it’s added to your credit reports by the issuing bank.

Now What?

After you’ve established credit and a credit score, your job is now to facilitate its growth and maintain its strength. Believe it or not, it’s actually very easy to maintain solid credit scores. All you have to do is a) never, ever miss a payment, and b) maintain low (or no) credit card balances. If you’re able to do those two things, then it will be next to impossible to have anything but a great credit score, always.

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John Ulzheimer

Contributing Writer

John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. The author of four books on the subject, Ulzheimer has been featured thousands of times over the past decade in media outlets including the Wall Street Journal, NBC Nightly News, The Los Angeles Times, CNBC, and countless others. With professional experience at both Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.