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How Long Does It Take to Build Your Credit?

Sandra MacGregor

Feb 03, 2022 9 min read

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Time to build a good credit score
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    Your credit score can have a big impact on all aspects of your life, from getting a job, to finding an apartment, to even getting the best deal on a loan. If you’re just starting to build credit from scratch, you can get an initial credit score generated in as little as six to eight months. If you already have a credit score but it’s on the low side, it could take as long as six or seven years to build your credit score up to a top rating of “excellent”, depending on what’s bringing your credit score down. But don’t get discouraged! Like exercising or learning a new skill, building credit is a long-term endeavour, and patience and diligent money management will pay off. 

    How Long Does It Take to Build Credit From the Ground Up?

    If you’re a newcomer to Canada, a young adult or you just haven’t had a lot of opportunity to build up a credit score, it’s important to build credit history as soon as possible so you can use credit to your advantage and enjoy the benefits of a good credit report. The sooner you get started the better, because it can take a long time to build credit from scratch. Expect six or seven years of very responsible credit management before you have a high credit score. But don’t worry, you can start to establish a credit score within six months of getting your first credit card or loan.

    How Long Does It Take To Rebuild Bad Credit?

    Though it may seem counter intuitive, it can actually take longer to repair bad credit than it can to build a score from scratch. That’s because credit bureaus penalize consumers who mismanage their credit. Things like missed payments, charged-off credit accounts and bankruptcies can stay on your credit report for at least six years or more. 

    While you may see a bad credit score rise incrementally once you start managing your credit responsibly, credit bureaus will not remove negative items on your report until the allotted time has passed. For this reason, it can take years to fully cleanse your report of bad credit mistakes. 

    How to Start Building Your Credit

    Here are some steps you can take to start establishing your credit score.

    Understand the Basics of Credit

    You really can’t start to build credit unless you have a solid understanding of just what credit is and how credit scores work. Credit scores range from 300 to 900. The higher your score, the more likely potential lenders will perceive you as a good credit risk who will pay back debts. Credit bureaus (in Canada there are two credit bureaus: Equifax and TransUnion) manage your credit score and give you a rating based on the following five factors, each of which makes up a different percentage of your score. 

    • Payment history (35%)

    • Credit utilization (30%)

    • Credit history (15%)

    • Credit mix (10%)

    • Credit inquiries/credit checks (10%)

    Once you understand the elements that make up your credit score, you’ll know what to pay attention to when managing your finances to ensure you establish a strong score. 

    Check Your Credit Report

    It’s vital to review your report a few times a year so you can be sure there are no inaccuracies. Errors can cause your score to decrease, and if they are left unnoticed, you may have trouble getting your score up to where it used to be. If you review your credit report and spot incorrect info, you can take specific steps to dispute credit report errors with Canada’s credit bureaus. Disputing errors can often be a quick way to improve your credit score if there’s an error bringing your score down.

    Services like Borrowell allow you to download your credit report for free, allowing you to review your report for errors on a regular basis.

    Get a Credit card 

    One of the best ways to build credit is by using a credit card and managing payments properly. Consider one of the following three different kinds of credit cards.

    Secured credit cards 

    A secured credit card can be a great way to build up your credit score over time. Because you have to supply a deposit to get a secured card, they are much easier to apply for than traditional credit cards because your deposit protects issuers against potential defaults. Your payments are reported to a credit bureau, which helps you establish a score. 

    Student credit cards

    Student credit cards are among the easiest to apply for because they are geared towards students who aren’t expected to have much of a credit history or income. To get a student card, you may be required to show proof of attending a postsecondary institution. 

    Retailer’s store credit cards

    Store credit cards tend to be easier to get because retailers want to encourage you to shop with them. The downside is that they often come with high interest rates and low credit limits.

    Sign up for Borrowell's Credit Builder

    Credit Builder is a $240 secured installment loan with a 36-month term.

    All payments (including missed payments) are reported to Equifax and TransUnion. Positive payments reported to the credit bureaus help you build credit, which is an important factor in qualifying for lower interest rates and better offers on credit cards, mortgages, loans and more. At the end of 36 months, your total savings of $240 will be directly deposited into your bank account.

    Take Out a Loan with a Co-signer 

    If you have trouble getting a loan on your own because you haven’t built up enough of a credit history, a co-signer could be a good option. A co-signer, usually a friend or family member with a solid credit score, applies for a loan with you and agrees to be responsible for payments if you default. Just don’t go for this option unless you’re sure you’ll pay off the loan as it can be a huge burden on your co-signer. Making regular repayments on your co-signed loan can help you build credit history over time.

    Develop Healthy Credit Habits

    Developing healthy credit habits now will serve you well in the long run. Make it a habit to monitor your credit report, never miss a payment, and don’t overextend yourself by taking on too much debt. 

    Why Does Building Good Credit Take Time?

    A good credit score takes years to build because credit bureaus want to see that you can manage credit over time. It’s not enough to make all your payments for your loans and credit cards on time for just a year or two, credit bureaus only assign the highest scores to those who prove they pay off their debts and manage money well over a span of years. The longer you show you can responsibly manage your debts, the more certain credit bureaus will be that you’re a good credit risk and will reward you with a high score. 

    Another reason it takes so long to build credit is that even just one or two financial missteps can have a significant negative affect on your score. One or two missed or late payments could take a “good” score down to a “poor” score and it can take years to get your score back up.

    Why Does Having a High Credit Score Matter?

    Your credit score affects nearly every aspect of your life. A high score can make it easier to get a job, be approved for top-tier financial products, get better rates and terms on mortgages and other loans, get approved for credit cards and even rent an apartment or lease a car.

    How to Keep a Good Credit Score

    Once you get started on the path to good credit, it’s important to keep up your momentum because once your score drops it can take a long time to get it to rise again. Here are some steps to stay on track. 

    Check & review your credit report

    As noted above, reviewing your credit report regularly is key to keeping up a strong credit score. If you find any mistakes, report them to a credit bureau immediately. Both credit bureaus in Canada have a dispute process you can follow to report an error.

    Pay your bills on time

    Remember that payment history makes up 35% of your credit score so it’s crucial to avoid missed and late payments. Even just one late payment can stay on your report for six years. When it comes to credit, even the smallest mistakes can have a big impact.

    Pay more than the minimum balance

    Only paying off the minimum balance on your credit cards is one of the fastest ways to accumulate a mountain of debt. Interest charges quickly add up and you could easily end up paying more in interest than you paid for your original purchases in the first place. Just paying the minimum balance could cost you thousands of dollars over the years.

    Keep you credit utilization low

    Credit utilization is how much of your available credit you’re using and it’s the second most important factor influencing your score. The more credit you use, the more it looks to potential lenders like you are taking on too much debt. Credit bureaus like to see a credit utilization ratio below 30%.

    Increase your credit limit

    Having a higher overall credit limit with your credit cards will help keep your credit utilization low — as long as you don’t increase your spending to match your new limits, of course. If possible, never use more than 30% of your available credit. The key is to increase your limits but not increase your spending.

    Don’t close old accounts

    Don’t cancel old credit cards even if you don’t use them, because they help increase your credit history. Cancelling a credit card can negatively impact your credit score because it increases your credit utilization and shortens your overall credit history. As a result, your credit score could take a noticeable hit if you decide to cancel a credit card.

    Don’t apply for a lot of new credit

    Applying for many different credit products (like credit cards or loans) in a short amount of time will generate a large number of hard credit inquiries that will show up on your credit file. Hard credit inquiries can temporarily impact your credit score. If you’re thinking about getting a new credit product, focus on one type of product at a time, as credit bureaus will understand that your shopping around for a single product and won’t heavily reduce your score.

    Build Your Credit and Your Financial Future

    Like learning a new skill or saving up for a big purchase, building your credit takes time. If you’re starting from scratch, you’ll need at least six months of credit history before credit bureaus are able to generate your credit score. Improving your credit score for a low rating to a top rating of “excellent” can take time, but it will help you unlock new product approvals and lower interest rates on loans and mortgages. You can use a service like Borrowell to check your credit score, track your credit score changes weekly, and gain personalized tips on ways you can build up your credit score. Happy building!

    Sandra MacGregor
    Sandra MacGregor
    Personal Finance Writer
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    Sandra MacGregor is a professional writer who specializes in topics such as finance, travel, health, and lifestyle. Her work has been featured in the Toronto Star, the Montreal Gazette, and the New York Times. She is a regular contributor to the Borrowell blog.

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