How long does it take to build good credit?

Written by geoffrey weed
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Although many people don't know their credit score at any given point, it is an extremely important part of a person's financial life. A good credit rating can open fiscal doors and loan opportunities that are closed to the majority of people. Unfortunately, however, it can be relatively hard to build good credit and it can take a long time to do so. Of course, the length of time that it takes to build a good credit score depends of several variables that are different from case to case.

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Identification

In the United States, the most common credit rating that is used is referred to as the FICO (short for Fair Isaac Corporation) credit score. This type of rating was invented by engineer Bill Fair and mathematician Earl Isaac (the founders of the Fair Isaac Corporation) in the 1950s. FICO scores are given in a three-digit format and range between 300 and 850, with higher numbers representing a "better" credit score. There are a variety of ways to you can improve your FICO credit score and other such credit ratings.

Function

There are several main methods of building good credit, each with its own associated time frame. The first step is to secure a line of credit, usually a credit card or small loan of some type. It is important to always make payments on time and to make sure that you never overextend yourself financially and take out more debt than you can easily repay. It is also important to make sure that your debt remains relatively small in comparison to the credit available to you. All of these things will help to build your credit score in a positive manner.

Considerations

There are several major considerations involved in determining how long it will take a person to build a good credit score. The first consideration, and generally the most important one, is previous credit history. Those with an extremely poor credit rating or a lot of bad credit history will find it extremely difficult to build good credit. A bankruptcy, for instance, generally has a major negative impact on a person's credit score for around 10 years.

Another thing that seriously impacts the length of time required to build good credit is a person's yearly income. Whether it's fair or not, those with high salaries will be able to build good credit much more rapidly than those who earn less money.

The last element that is crucial is the availability of a co-signer with established credit. Those who can secure loans with the help of a parent, guardian, friend, relative or spouse who is willing to cosign on the loan will find that is much easier to get a relatively good loan and to quickly build good credit.

Time Frame

The exact time frame that is required to build good credit varies significantly based on the variables mentioned previously. A person with no previous credit history who secures a loan, is never late on payments and who makes a good amount of money will be able to build a relatively good credit score within six months to a year. Those who have a terrible credit history, a severely low credit score and less income often require upwards of a decade to repair their credit and get it back to a decent score.

Warning

There is no real shortcut to building your credit score, though many people claim that there is. Sound financial planning, reasonable spending and sober handling of credit are what is required, and it just isn't a process that can be sped up easily. Always be sceptical of those who claim they can rebuild your credit quickly, particularly if they want compensation in return. There are many scams out there that seek to take advantage of those who are desperate and who are least capable of bearing any unnecessary financial burden.

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