Building A Great Credit Score

Building Great Credit? 7 is the Magic Number

By Mike Peterson
In April 25, 2016

Here’s something that might surprise you: While it’s absolutely true that responsible credit use is a must for establishing a good credit score and a strong credit history, time is also a factor. Simply having a few years of established credit is a step in the right direction. Sometimes, the key to a higher score is simply waiting a few years. So if you’re working on building great credit, 7 is the magic number.

So, how long does it take to establish a credit history? How many years does it take your credit to bounce back after a few missed credit card payments? Why do younger people tend to have lower credit scores than older folks? Why does it seem like everything in the credit industry takes seven years?

To answer these questions, let’s take a more in-depth look at some of the ways time can affect your credit score.

  • Your payment history makes up 35% of your credit score. Yes, paying on time and not having too much debt is important to your credit score, but a surprisingly large percentage of your FICO score is based on your payment history. The lesson here? If you pay your debts on time, you’re more likely to have a higher credit score.

Of course, there’s a little more to it than that. The length of your payment history matters, too.

In fact . . .

  • The length of your credit history counts for 15% of your credit score. That’s right: The simple fact of how long you’ve had credit This can be a point of frustration for younger folks, or anyone trying to build credit from the ground up, and with good reason. Basically, this means that even if you’ve got a rock-solid payment history, you pay your balance in full each month, and you have a low ratio of available credit to credit used, your credit score may still be low if you’re relatively new to credit cards.
  • Starting from square one? It’ll take a few months to get a credit score. If you’re starting from scratch, it’ll take a while to even build up a credit history. If you are trying to establish credit and you have NO credit history at all, it will probably take about six months before you have an official FICO score.

But don’t feel discouraged if your score isn’t super-high at first: As I mentioned above, the length of your credit history matters. So, the more time that passes, the higher your score will climb (assuming you don’t have any late or missed payments and you don’t max out your card).

  • It takes time to establish good credit history. Patience really is key when it comes to credit. If you’re establishing new credit or trying to rebuild a less-than-perfect score, it’s important to remember that it won’t happen overnight: In fact, you can expect it to take about seven years to fully establish your credit history.
  • It takes time to shake off bad credit history. Did I mention that credit takes patience? If you’ve got negative information dragging down your credit score (think late or missed payments, collection activity, and the like), it will typically stay on your credit report for seven years. I know – it’s a long time. But keep in mind that, although the bad stuff hangs on for seven years, it tends to have less of an impact as time goes by.
  • Some negatives will stay on your credit report longer. Although “seven years” seems like the magic number when it comes to your credit, there are some exceptions to that rule: Bankruptcies and government debt (such as student loan debt or any taxes you owe) can remain on your credit history for ten years or more.

So, there you have it: When it comes to credit and debt, time really does make a difference. A few years of responsible credit card use and debt reduction can help you establish credit or even recover from not-so-great credit due to debt problems.

Oh, and here’s one more number to remember: Three. As in, you get three free credit reports per year from the three major credit reporting agencies. These reports won’t give you your exact FICO score – but they will give you a thorough picture of your credit history, along with the opportunity to look for anything that might be dragging down your score, such as errors or fraud. You can get your three credit reports here.

And if you debt advice or have questions about debt, credit, or credit cards, you can always reach out to Debt Guru.  Contact the Debt Guru team today for a free debt consultation.

Mike is the author of “Reality Millionaire: Proven Tips to Retire Rich” and he has been published in a variety of local and national publications including Entrepreneur Magazine, Deseret Morning News, LDS Living Magazine, and Physicians Money Digest. He holds a B.S. in business administration from the University of Phoenix.

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