The primary factor that determines whether you qualify for a loan is your credit score. So, what happens when you have bad credit or no credit at all?
Does this automatically mean you’ll get turned down for the loan you want?
Not necessarily, but you’d be a lot better off if you took the time needed to work on your credit. With the right steps, you could improve your bad credit score to a good score, or you could go from having no credit at all to having great credit.
You’re probably wondering, “how long does it take to establish credit?” This question is a good one to ask, and the answer is not that long.
If you take the right steps, you could go from no credit or bad credit to good credit in just a matter of a few months. Here are three tips that will help you improve and build your credit score.
1. Change Your Credit Utilization Rate
A credit utilization rate is a ratio that compares the amount of money you owe to the available credit lines you have. If you analyze the key components of a credit score, you’ll see that the amount you owe makes up 30% of your score.
It’s not just about how much you owe, though. It’s also about the mix of accounts you have, the types of debts, and the amount you owe compared to your credit lines – your credit utilization rate.
To improve your score, you’ll need to change this rate, and there are several ways to do that:
- Pay off balances you currently owe
- Ask for credit line increases
- Open new credit cards but don’t use them
If you do any of these things, it could change this rate and lead to a rise in your score.
2. Become an Authorized User
If you literally want to boost your credit instantly, find someone with excellent credit and ask them if they would add you as an authorized user on a credit card account they have.
When someone adds you as an authorized user of a credit card, the credit card company posts the history of that account to your credit report. You instantly have years of positive payment history on your report without doing any work.
The crucial step in this is making sure the person that adds you has a perfect credit history on this credit card.
3. Get a Personal Loan
One of the other top ways to build and improve a credit score is by getting a personal loan.
A personal loan is an installment loan. Each month, you’ll have to make a payment. Each time you make a payment, you build a positive credit history. Within a few months, you could see a drastic improvement in your score by following this tip.
A lot of lenders specialize in personal loans, and you can learn more at Innovative Finance if you’re interested.
How Long Does It Take to Establish Credit? Find out More
No matter how bad or nonexistent your credit is, you can improve it. Establishing credit is not difficult with the right steps.
So, how long does it take to establish credit? Well, you can find out for yourself by using these tips. Check out more helpful articles on this topic by visiting our blog.