How Long Does It Take if You Want to Build a Good Credit Score From Zero?
- Open no more than two or three cards. Apply for a major credit card like MasterCard or Visa, which you can use for everyday purchases, and then apply for a few specialty cards. Special cards are available at gas stations and large retail stores. The mix of credit you have makes up 10 percent of your FICO score. Having a healthy mix of credit -- for instance, an auto loan, three or four credit cards and a mortgage loan -- is most favorable. Open your lines of credit gradually -- about six months apart -- to build a good credit score.
- Credit card utilization rate is the ratio of your credit card balance to your credit card limit. According to Kiplinger, a finance and business magazine, you want to keep your card utilization rate low, preferably no higher than 30 percent of your available credit limit. Doing so will increase your consumer credit score and prove to potential creditors that you can responsibly handle your accounts. Pay down every end-of-cycle balance to within 30 percent of your credit limit to obtain the greatest boost to your consumer credit score. Generally, it takes six months to see a dramatic increase in a consumer credit score.
- Making your minimum payment on time is essential to building a high credit score. In 2009, federal banking regulators issued new guidelines requiring credit card companies to increase monthly minimums. The new guidelines state that monthly minimums should cover interest, any fees or extra charges and at least 1 percent of the principal amount. Pay your bill at least five days before the due date if you're sending it by mail, and pay as high above the minimum amount as you possibly can every month. Your payment history starts with your first payment, so be on time.
- Focus on paying your credit cards on time and as high above the minimum payment as possible, and avoid increasing your existing credit lines. Take six months to one year to build your credit history before requesting a credit line increase on any card. Show potential creditors that you can responsibly handle your existing accounts, and are not in need of additional credit to cover your bills.