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How Long Does It Take to Build Credit?



Credit is increasingly important in today’s world. Today’s world is also very much all about getting there (wherever “there” may be) in a hurry.

But no one is born with a credit file. Everyone has to start somewhere. So if you are new to the world of credit, either because you are young or are new to the country, where do you start? And how soon can you get there?

How long does it take to build credit?

One thing to know if you are just starting out is that how long you have had credit has a direct bearing on your credit score. In the FICO score model, the longevity of your credit use is worth 15 percent of your total score.

While that may not seem like much, it is if there is not much else to build on. And your score is going to be a determining factor in what kind of interest rate and other terms (like down payments) you will qualify for when you apply for credit.

The good news is that while credit scores range from 300 to 850, no one really starts out at 300. On the flip side of that, any score under 580 is considered poor and subprime credit usually is 619 or below.

It is possible to get a loan with little or no credit history. However, be very careful of any “no credit, no problem” deals you may see. To be sure, there are lenders out there willing to take a chance on you if you have a job or some source of income. But the terms are likely to be less than ideal. In addition to high rates and other terms (like high down payments), they may not report to the credit bureaus, which will not help you in your quest to build your credit.

I hate to burst anyone’s bubble, but building good credit is a time and patience game. However, there are better avenues to start the process that make it easier to get on the right credit foot.

What’s the best way to build credit?

Retail or gas cards

Starting out with a retail store card or gas card are two of my favorite ways to begin building your credit. These cards are usually easiest to qualify for, as the issuer wants to attract and keep new customers shopping at their businesses.

Offering charging privileges is a tried and true method to build consumer loyalty. Your limits may be smaller than you’d like to start with, but that is not necessarily a bad thing. Until you learn how to manage your credit, less is definitely more.

Become an authorized user

Another great way to build credit is to be added to someone else’s credit card as an authorized user. This method is often used by parents to help their children build their own credit.

As an authorized user, you will have access to the credit card, but will not be responsible to the lender for payment. This does not mean that you won’t owe your mom or dad if you use their credit card. But that will be between you and your parents or the card owner, not you and the creditor.

Anyone can be added to someone else’s card as an authorized user. Also, be sure you use caution and check that the card in question is in good standing so that only positive information will be added to your own file. Each credit bureau treats authorized users differently. As an authorized user, TransUnion and Equifax may report negative information about the account, while Experian does not.

Secured card or passbook loan

You can also look into secured credit cards or passbook (first step) loans. Both of these methods require you to put up a deposit so that you are basically borrowing your own money. This makes it easier for a lender to take a chance on someone with little or no credit because if you default for any reason, the bank or lender will be able to take your deposit as payment. But defaulting is never a good idea, especially when you are trying to build a credit file of your own.

I like both of these products for credit building, but a passbook loan can be helpful if you already have a credit card. It is classified as an installment loan and will help the credit mix portion of your score, which is worth 10 percent. Again, that doesn’t sound like much, but it’s very helpful to those with thin credit files.

No matter the product you choose, credit card or installment loan, make sure that the lender will report to the credit bureaus, preferably all three. Also, be very sure to make your payments on time, each and every time. This is the single best way to both build on and improve your score. And it is best for your overall financial health to boot!

How to increase your credit score quickly

It can take less time to establish a VantageScore as it needs fewer data and a shorter time using credit to generate a score than FICO. The elves at VantageScore can produce a score with just a month or two of a consumer opening a credit account. FICO generally requires six months of credit history.

There are some fairly new product offerings on the market to help those with little credit as well as those who are looking to improve the score they already have.

Experian Boost looks at cellphone and other utility bills that are not typically reported to the credit bureaus and adds positive payment information to your credit report, offering an instant “boost” to your score. The relevant information comes from your bank account. This is a free service and you can opt out at any time.

UltraFICO is another free, opt-in service that looks at your positive banking data to improve your credit score. But it’s still in the pilot phase, so it may not be available to all consumers. It is also important to understand that both programs will only affect your Experian report and score, but for those with thin files the additional positive information can be quite useful.

How to go from a bad credit score to a good one

  • First, get copies of all three of your credit reports from and go over them carefully. If you find errors, take the necessary steps (included with your reports) to have them corrected or removed.
  • In the meantime, you must pay all of your bills on time, every time. Payment history counts for 35 percent of your FICO score, making it the most important scoring factor.
  • If you have credit cards, I suggest that you watch your credit utilization ratio. This is the amount of your credit limit you have used. Try to keep this percentage to 25 percent or less and know that those people with the best credit scores have utilization ratios in the single digits.
  • You can look into adding to your credit mix, as referenced earlier, but only apply for new credit when you need it and when you are fairly certain you will qualify.

Most importantly, have patience. Building a good credit score takes time, but will be worth it to you in the form of lower interest rates, better odds of approval for the best credit cards and more favorable terms on future loans. A better score can even mean lower insurance premiums.

Good luck!

Have a credit scoring question for Steve? Drop him a line at the Ask Bankrate Experts page!

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Bad Credit

10 things you didn’t know will help you get a mortgage



Anyone who wants to apply for a mortgage right now will know that it’s not easy. Coronavirus has made the process of applying longer, while lenders are now more careful than ever about who they will lend to. You probably already know that having a healthy credit score is essential to a successful mortgage application, but how can it be achieved? Personal finance experts from Ocean Finance  weigh in with the top tips for making sure your application is a success – that you may not have heard about. 

1. Make sure your name is on all household bills

If you share a rental, it can be tempting to let someone else put their name down on the utility bills and just pay them back. If you want a mortgage, avoid doing this: bills with your name and address on them are proof that you pay them on time. This especially applies to the rent itself – never move into a house share without your name being on the contract. Before applying for a mortgage, ask your landlord for a letter confirming that you pay on time. 

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How Can I Prequalify for a Personal Loan? A Guide



When you are in need of money quickly, you very likely don’t want to sit around pondering a bunch of different options. You want to find the option that works best for you and utilise it. Unfortunately for so many people around the country, it can be difficult to get their hands on the money they need due to them having a bad credit score, or even no credit score at all.

How Can I Prequalify for a Personal Loan?

Photo, Varun Gaba.

Your credit score is thought of as being pretty important, as it shows your financial trustworthiness to financial institutions like banks, credit card companies, lenders, and more. Your credit score is one thing that will usually be considered by just about any company you apply for a loan through, so keeping a close eye on your credit score is imperative for your financial life.

No matter what your credit score looks like, knowing how you can prequalify for a personal loan can be a comforting feeling when you are in need of quick cash. After all, when you are eligible for personal loan prequalification, you feel a little better going into the loan process knowing you won’t have to wait around for a loan decision.

How is Pre-qualification Decided? Prequalifying for a personal loan can depend on several different factors that you will have to keep in mind, and it will vary greatly depending on the lender you are applying through. Here are two of the things you will need to keep in mind when it comes to your loan that could affect whether or not you prequalify for the loan.

— Your credit score; Yes, this is always going to be something you are going to need to think about. Depending on the financial institution or lender you are going through, you can bet that your credit history and score will play a huge part in whether or not you prequalify.

— The amount of your loan; How much money you plan on borrowing from the lender or bank is also going to play a part in deciding whether or not you prequalify.

To get the most out of your search for a lender that you could prequalify with, think about applying with more than just one lender. This way, you might get several pre-qualification offers, and this will allow you to sort through the lenders and decide which one works best for you.

How Can I Prequalify for a Personal Loan?

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The Pre-qualification Process: No matter where you are trying to prequalify for your loan through, you will find the process to be pretty simple and largely similar across most lending platforms. You will need to provide some information to the lender that will help them decide whether or not to prequalify you.

How Can I Prequalify for a Personal Loan?

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Some of the information you will need to provide includes:

— Your full name; You will want to make sure you provide your full legal name so you can make the process simple for yourself and the lender. Depending on the lender, you might also be asked to provide images of your government issued ID or driver’s license to validate your identity.

— Your income and information on your job; Your income and employment status are often considered over your credit score when it comes to pre-qualification for loans, especially if you are applying for a personal loan through a lender who deals with customers with bad credit or no credit.

— The loan amount you want; Of course, you will have to include the amount of money you would like to borrow. Make sure it is something reasonable, and something that you can realistically pay back on time.

What Will the Lender Do? If you are trying to prequalify through a lender who specialises in bad credit clients, then you won’t have to worry about your credit score being negatively affected by taking out your loan. However, if the lender reports to the credit bureaus, your payments could still make an impact on your credit score.

If not working with a specialised lender, you might find that the lender will do a soft inquiry on your credit when going through the pre-qualification process. No worries here, as this doesn’t put any dents in your score. If you prequalify for the loan you are looking for, you should get an alert via email from the lender of your choice.

The Money You Need: Hopefully, you will have prequalified for the loan you are looking for so you can ensure you have access to the money you need, when you need it. Whether you’re going through some unexpected circumstance in life or just need money to pay something off quickly, knowing you are prequalified for the loan you need is a comforting feeling, allowing you access to the cash you need for whatever you need it for.

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Are No Down Payment Auto Loans Bad?



Qualifying for a zero-down car deal likely means having good credit and qualifying income. However, if you’re a bad credit borrower, you’d be hard-pressed to qualify for an auto loan without a down payment. Besides – down payments are typically a great idea for borrowers across all credit ranges!

Is Zero Down a Bad Idea?

Opting for a zero-down car loan isn’t a bad thing – but with a lower credit score, it’s not likely to happen. Most bad credit auto lenders require at least $1,000 down or that you bring at least 10% of the vehicle’s selling price to the table. Down payments are a requirement of most subprime (bad credit) lenders, and it’s often called having “skin in the game.”

Are No Down Payment Car Loans Bad?Research shows that borrowers with skin in the game are more likely to complete a car loan. To a lender, a borrower that brings a down payment to a deal is more likely to make their payments, complete the loan, and avoid default. It also means a higher likelihood of qualifying for the auto loan.

Down payments can widen your vehicle choices since they allow you to get into more expensive cars that are outside your preapproval amount. If you’re approved for a $15,000 auto loan, but can’t find anything for your situation, adding a larger down payment amount may open up more vehicle choices. In this scenario, if you have your heart set on an $18,000 vehicle, coming in with a $3,000 down payment could put it in your price range.

More Down Payment Benefits

Auto loans are typically simple interest loans, meaning you’re charged interest on the principal of your loan. If you combine a large loan amount, a high interest rate, and a long term, it can mean paying more than your vehicle is worth.

Remember this:

High loan amount + High interest rate + Long loan term = Paying more interest charges. A down payment can combat this, and help save you money.

For borrowers with poor credit, a high interest rate could mean paying more for your auto loan – but a down payment can soften the blow.

Down payments can help protect you from negative equity, too. Negative equity is when you owe more on the auto loan than what the car is valued at. Vehicles are depreciating assets, meaning they lose value over time, and that never stops.

Negative equity causes problems for borrowers when it’s time to sell the vehicle. If you owe thousands more on the loan than what you can sell the car for, you may not be able to sell the car. You must pay off the loan before you can transfer vehicle ownership.

If you finance a vehicle for $10,000, that car may not be worth $10,000 in a year. Most used vehicles lose around 10% to 15% of their value each year. Brand new vehicles can see around a 20% drop in value within the first 12 months of ownership! Having a down payment can help keep your auto loan in an equity position, which means you’re likely to have fewer issues selling the car if you need to.

How Much Should Save for a Down Payment?

Your down payment requirement largely depends on your credit score and the size of the loan you’re applying for. Like we mentioned, saving at least $1,000 is probably a good starting point if your credit score is less than perfect. But if the vehicle you want is expensive, it could mean having to shell out more cash than that to qualify for the loan.

How much you need to save can also depend on your monthly budget. If you want a specific vehicle but the monthly payments are too high, you can put more cash down to lower your payment and make the loan work for your situation. You can use our auto loan calculator to estimate how much you may need to put down to get your car payment where you want.

You also don’t need cold, hard cash to meet a down payment requirement. Trade-ins with equity can completely satisfy a down payment requirement if there’s enough value, or you can use a combination of cash and your trade-in. If you have a car you’d like to trade in, research its estimated value on sites such as NADAguides and Kelley Blue Book so you can see what a dealer may offer.

The bottom line with down payments is you should save as much as you comfortably can afford. Even if you qualify for a zero-down car loan, putting cash down on your next auto loan is only going to bring you benefits in the long run.

Where Can I Find Bad Credit Car Loans?

If your income or credit score isn’t quite up to snuff, then you can expect to need some cash down to qualify for vehicle financing. You may also need to work with the right auto lender to get the vehicle financing you need.

With a lower credit score, not only are you faced with a down payment requirement but also the struggle of having to find an auto lender that can work with poor credit. Most traditional auto lenders prefer borrowers with good credit. If your credit score is rough around the edges, then applying for vehicle financing through a special finance dealership could be the way to go.

Special finance dealerships are signed up with subprime lenders. These lenders specialize in assisting borrowers with credit challenges and look at more than your credit reports and score. They do require a down payment, but they can often work around tough credit circumstances.

At Auto Credit Express, we’ve amassed a nationwide network of special finance dealerships and we want to help you find one in your local area. To get matched to a dealer near you that has bad credit lending options, fill out our free auto loan request form.

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