How much credit history do you need to build a good credit score?

Your history can be a huge aspect for rates and approval possibility when obtaining credit

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You can’t have an excellent credit rating without very first developing your credit report.

Excellent credit suggests you’ll receive lower rate of interest when you’re wanting to purchase an automobile or a house or get other kinds of credit.

There’s more to your credit rating than just how much you owe. The age of your accounts is an element too — and a crucial one.

Here are some truths about credit report and various methods to increase your rating:

The beginning point

Building your credit is a process that can take months or years.

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It’s important to develop your credit as early as possible. Fundamental things like leasing an apartment or condo or perhaps getting energies can be much more difficult if you have bad credit or no credit. It may even avoid you from getting a job.

In order to begin developing your credit rating, you should have an account that reports your payment history and balance to among Canada’s 2 significant credit bureaus: Equifax and TransUnion.

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And while the 2 usage somewhat various info and computations, their focus is on the very same aspects. Your payment history, for instance, comprises 35 percent of your rating.

After about 6 months of credit usage and payments, the bureaus will have sufficient info to start creating your credit rating.

6 months is typically the bare minimum that you require in regards to developing a rating that lending institutions will take a look at. In a lot of cases, lending institutions think about in between 2 to 4 years of history an excellent beginning point.

What is an excellent credit rating?

credit ratings drawn out.

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According to Equifax, credit history from 560 to 659 are generally thought about reasonable. A rating of 660 to 724 is thought about excellent; 725 to 759 is viewed as excellent; and 760 and greater is thought about outstanding. If you’re simply starting constructing your credit, a rating in the high 600s or low 700s is an excellent target to go for.

When you start constructing credit, nevertheless, you don’t start with a 0 or a very low number like 300.

Precisely how credit is scored is the stuff of complicated algorithms and trade secrets, but there are things we know help it go up: pay your bills on time, don’t carry a huge balance and don’t open too many accounts too close together.

With that said, here are some other ways to build your credit score.

Looking to keep building up your credit and get some rewards at the same time? You can get a no-fee, cash-back Visa card to do exactly that.

How time affects your credit score

Credit cards in a wallet with a clock in the background.

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Having older credit accounts with a good payment history shows lenders that you’re responsible with your financial obligations.

But lenders will also look at other things, like the number of accounts you have and their average age. This can all affect what kind of interest rates they give you when you apply for things like personal loans, credit cards or mortgages.

There are many factors that go into calculating your credit score, but hanging on to an older credit card you still use — and shows a strong payment history — is a good idea.

The other aspect to consider is the average age of your accounts. This is determined by just adding the age of each account and dividing it by the number of accounts.

Let’s say you have four credit cards: one is 12 years old, one is 7 years old, one is 4 years old and the newest is one year old. If you add up those ages (12 + 7 + 4 + 1 = 24) and divide that by the number of cards (four) you get an average account age of six years.

As you can see, every new credit card or account you add will lower the average age. So as tempting as some new card offers may be, the hit to your account age may not be worth it.

Helping you build a good score

One of the most important places to start when it comes to building and maintaining good credit is simply knowing what your credit score is. And staying on top of your score isn’t only good for your peace of mind, it can also give you an early warning when it comes to things like fraud or if an account has lost its good standing.

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There are sites that offer free credit monitoring, which is a great place to start getting into the habit of keeping an eye on it.

If you’re concerned that your credit score could use a bump in the right direction, there are also services designed to help you monitor and give you tips to raise your credit score.

And if your existing debt has you starting to feel swamped, [you should consider folding all of your debt into a consolidation loan with a lower interest rate.

  • Credit building: If you need to build your credit up, there are dedicated credit-building services designed to help you do just that.
  • Get a credit card designed to help you build your score: Provided you haven’t just applied for or got a new credit card, you can sign up for a new card and get a jump on building your credit while enjoying benefits like no fees and cash back.
  • Credit repair: Is your credit not where it should be and you need to put in the work to repair it? You can get a credit-repair loan to help get your score back up.

This article was created by Wise Publishing, Inc., which provides clear, trustworthy information people can use to take control of their finances. Millions of readers throughout North America have come to count on the Toronto-based company to help them save money, find the best bank accounts, get the best mortgage rates and navigate many other financial matters.

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Jobber Wiki author Frank Long contributed to this report.