If you are wondering how long it takes to build a credit history, the answer is that it depends on your circumstances. In this article, we’ll go over the process of building a credit history and offer some helpful tips on how to start the journey.
Why is my credit history important?
Not having a credit history may seem like a good thing. After all, it indicates that you have been financially stable enough to pay for your purchases without borrowing. And that can’t be a bad thing, right?
In many ways, it is a good thing – until you find that you actually need to borrow money. That is where the importance of having a credit history comes in.
Your credit history is recorded in your credit report and is used to calculate your credit score. Lenders will use your credit history and score to determine whether you can be relied on to repay what you borrow. Basically, before they lend you money, they want proof that you’ve borrowed before and paid the money back.
Nowadays, you require a credit history and score to get approval for almost any kind of financial product, including personal loans, credit cards and mortgages.
Some landlords will also conduct a credit check to determine whether you are a worthy tenant.
Additionally, your credit history can affect your ability to get a job. Employers may ask to check your credit history, especially if you are applying for a position that requires you to handle money.
How can I build up my credit profile?
There are several simple steps you can take to begin building up a credit profile.
1. Get on the electoral register. Companies will use the information on the electoral register to confirm your identity. The confirmation of your identity can be the first step towards building a credit profile.
2. Open and manage a bank account. Having a bank account and managing it well indicates to lenders that you are financially responsible. It can be a big boost on your credit-building journey.
3. Get a credit builder credit card. This is a credit card that is aimed at people who are trying to build up a credit history from scratch or who want to get their poor credit report into better shape. These cards will typically have lower credit limits and higher APRs, but they can go a long way in helping you build a positive credit history. Just make sure you stay within your limit and make your repayments on time and in full.
4. Manage small credit accounts. Without a credit history, it might be hard to get significant forms of credit like a mortgage or a large personal loan. However, you might still be able to qualify for smaller forms of credit like a store card or a mobile phone contract. These can help you demonstrate your ability to pay bills on time and improve your creditworthiness.
5. Pay your household bills on time. Different utility providers have different standards regarding how they report information to credit agencies. However, it’s always important to stay on top of your bills. This can help show companies that you are financially responsible.
How long will it take me to build a credit history?
As previously mentioned, this depends.
If you have absolutely no credit history, it can take up to six months to start seeing results from some of the actions highlighted above. The size of your file and the information available to agencies will, of course, depend on your actions during this time period, including the amount of credit you access and how you use it.
The key thing is to just get started. With time, you should start seeing your credit profile take shape.
Bear in mind that once your credit profile is established, it may take even longer for you to build what is considered a good credit score. For tips on this, check out our article on how to improve your credit score.