How quickly can you build your credit score?

Question

I'm 18 years old, just got my Bachelor's Degree in Business (I graduated from High School at 15), have no credit score, 20K saved up, a full-time job, and am looking to buy a home for 200K or less (I live in an area conducive to this).

How quickly can someone as young as me build a credit score into the 700s starting from a non-existent credit score?

Or, would I be better off getting a manually underwritten mortgage that requires no credit score (from a company like Churchhill mortgage)?

Thanks!

Melissa Hartvigsen · Answer

The fastest way to instantly get credit is to have a responsible adult with good credit and responsible credit card usage add you as an "authorized user" to their account. This imports their payment history onto your credit profile, which will give you a score right away.

You could also have someone cosign the loan for you. Your score will start building up once you have a mortgage, and after about six months of making payments, you’ll have a decent score. The other benefit to having the cosigner is it will help you meet the income requirements for the loan. Most banks are going to require that you have two years of steady payment history on the job before giving you a loan.

There is a service called Experian Boost that can help build your credit history using, cell phone payments, streaming services, and your other bills.

If none of the above are available to you, the next strategy may take six months to a year.

You can get a secured card through your bank or credit union. They basically have you set up a savings account that will pay the bank if you default on the credit card. After 6 months to a year, you may be eligible for a regular credit card, and then they would close the account and send you the savings deposit back.

A few things to keep in mind:

The credit bureaus algorithm isn’t straightforward so no one can tell you that you’ll have a 700 score in X amount of time.

The trick to keeping your score high with your new credit card is to never use more than 30% of the available credit, and to pay the ENTIRE balance every month. Example. If you have a $500 credit limit, the maximum you should charge on that card is $150. When you go above 30% of the available credit, the credit bureau actually deducts points from your credit score.

Part of having good credit is having a mix of installment loans (like home loans) and revolving credit like a credit card.The rest of getting good credit is built on time and payment history.

Best wishes,

Melissa

Jason Wray · Answer

No problem if you ever have questions just reach out!

Isaac Hemingway · Answer

Thanks for the advice!

Jason Wray · Answer

Issac,

Quickest way to get a 700+ fico score is have a family member (Mom, Dad) put you on one of their credit cards as an "Authorized User" which means that have to call the credit card company and add you using your date of birth and social security number.  *Important notes - you have to make certain that the card they choose has a 30-35% credit limit to balance ratio.  Make sure that that cards has had not lates in the last 5 years.

Credit cards that have a balance every month being paid down versus paid off every month with earn you a faster score improvement.  You can also go to your bank and ask them to open up a "secured credit card".  Which means you deposit cash into an account that is used similar as a debit card but reports to the bureaus.

The most important thing is the more you deposit the higher the limit.  Keep in mind the ratio requirement is 30-35% so you never want to spend or use more than 35% of the limit.  So if you deposit $800 into an account you want to keep your balance under $280.00.  You make monthly payment for at least 6 months and your score should be where you need it to be for a mortgage.

This card can be used for gas, coffee, lunch etc monthly keeping the balance under 35% but do not pay off the balance each month just a minimum payment to keep the balance revolving. Once your sore is up to 680 go and apply for a credit card (No annual fee) do not fall victim to an annual fee.  Capital one has cards like Savor one, Chase has a Freedom card, Mission Lane has a card again No annual fee.

If you set automatic debit payment on your credit cards you will never be late.  Also request your payment be on the 28th of every month so that you can pay all of your cards same time every month.  You might have to request that 28th once you have made a few payment but try right away.

Kevin Sobilo · Answer

@Isaac Hemingway, congrats on what you have accomplished so far in life!

First I would look at your motivations and goals. Are you buying a home as a primary residence only? How long do you think you would live there? Will you use convert it into an investment property at any point?

The reason I suggest thinking of these things is that while owning a property is good the average person who buys a primary residence only stays in it about 7 years, I think. Coincidentally, that is about the same amount of time it takes to pay down the mortgage enough to get your money back out paying commissions and closing costs if you sell for the same price you bought it at!

So, if the market stays flat you "break even" with costs at about 7 years, even LONGER if the market softens.

With a cash-flowing investment, that is less of a concern because the asset is making you money every month but with a primary residence, you do want to think about that before you commit. Especially since your life seems to be evolving and changing quickly.

How quickly can you build your credit score?

Most Popular Reply