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RedKnight's avatar

How long will it take to go from no credit to awesome credit?

Asked by RedKnight (493points) May 10th, 2015

I just graduated and start my full time job later this year. I don’t have any student loans because of scholarships and I have never had any type of loan or credit. Basically, as far as I know, I have absolutely no credit history. However, I really want to save up and buy a house sometime in early 2016 if possible. I’m currently living at home so my salary won’t be affected by loans or rent.
I am wondering when I need to get a credit card(secured or unsecured?) and how long it will take to establish an immaculate credit score(720+,760+) for a mortgage? I know the basics of good credit from my research like always paying on time, paying in full, only utilizing 10–20 percent of the credit limit, etc. I really just want to know how long it will take to build awesome credit with these good habits so I know when to get a credit card.
Sorry if I provided too much personal information…I am not sure what all affects credit and such so I wanted to be more detailed. Thanks for the help!

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15 Answers

ARE_you_kidding_me's avatar

A while, but use that to your benefit. Save. To establish credit you will need to open up a credit card and charge something to it regularly but pay it off or keep a low balance. If you need any things like furniture most small credit unions will let you take out signature loans as long as you can prove an income and have funds in the bank. The key is make sure you always have the money to just pay the stuff off if needed. It will take a while to establish good credit. Make sure you steer clear of any and all store credit programs. Try to go through your bank if possible.

Coloma's avatar

Not long but remember the reverse is also true. lol
Also remember that your best bet as a new credit customer is going to be trying to find the best interest rates. No/bad credit, higher interest rates. Start with maybe applying for an electronics store card, something like Best Buy and then, look to either purchase small items and pay them off in full every month and/or if purchasing something bigger like a new TV etc. look for sales with deferred interest payments.

Something like if you either pay off the balance in a certain amount of time there will be zero interest charged or, you have one to two years before interest rates kick in. After 6 months to a year of no late payments, and/or paying off your monthly balance you should be getting all kinds of credit offers. Your bank can also issue you a credit card ( Visa etc. )
to get started, probably a small credit limit to start depending on your income.
DO NOT take cash advances EVER, the interest rates are astronomical and their are fees attached as well.

Pachy's avatar

I recommend getting a credit card that has a set limit, a fairly low one; that’s a good way to build credit without getting in over your head. But whatever card you get, a REALLY good habit to get into is to pay off the balance EVERY month, without fail. That saves you interest and self-limits you to what you can afford to charge each month.

Pachy's avatar

I should add, I had to learn that the really hard way.

Coloma's avatar

Edit: and “there” are fees attached as well.

Inspired_2write's avatar

One good way to increase your credit worthmess is to save it. Credit card companies check your savings and determine amount of credit to offer you.
Good luck.

JLeslie's avatar

Get a credit card right away. Use it for everything and pay it off in full every month so you don’t pay any fees or interest. NEVER buy something on the card you can’t afford at the time you buy it. Once you have been paying in full for three months ask to have your limit raised and get a second credit card. A few months later possibly a third. Don’t get more cards than that in my opinion. I’ve never been a fan of multiple credit cards.

How much open credit you have increases your credit score, so the higher the limit the better. Paying on time increases your score. Being late is reported, it’s not like paying your doctor a little late who might never go through the process of reporting your tardiness. Credit cards, rent, mortgage, car payment, can show up if just a day late. Even some doctor stuff shows up quickly now that billing is being done by services for chain medical offices and hospitals.

RedKnight's avatar

Thanks so much everyone. I will definitely take this advice and practice those good credit habits. I think a big thing will be establishing a good limit and then just paying it on time. If I do all of that, do you all know a general time of when I would reach the 700’s from no credit? I guess that’s kind of a hard question to answer.

@JLeslie Is it better to get a second card to increase the limit or just increase the limit of the first card heavily?

JLeslie's avatar

@RedKnight I’m not sure if it’s just based on the total open credit or not. It’s good to have more than one card anyway. Like one visa and one American Express. That way if the store doesn’t take one they might take the other. Also, if you have trouble getting a Visa, MC or AmEx, you can try for a department store or something like a Target store card first and once you get that you can eventually get the Visa.

Don’t use Debit cards, they do zero for your credit. I’m going to assume you are going to be responsible with your credit cards from what you have written so far, you seem very responsible, and only buy what you can afford.

When you go to buy a house the banks are going to look at your savings too. You’ll need a down payment of course, and it should not be “gift” money, although the banks have loosened up a little in that. Meaning it shouldn’t be $20k your parents gave you as a down payment. If they are going to help you it’s good for them to gift you money in smaller amounts long before you go to buy a piece of property. I don’t mean teeny small, but a graduation $1k and a birthday $1k or Christmas $1k, etc won’t be questioned.

The bigger your down payment the better for getting approved. If you put down less than 20% you will be required to pay PMI, which basically is mortgage insurance, so it costs you more if you have less to put down. It’s not much more, and it disappears once the property has 20% equity.

Do you own a car?

RedKnight's avatar

@JLeslie Thank you! I’ve only used a debit card in college thus far. I will definitely only buy what I can afford once I get a credit card. I’m not sure if my parents will help me yet, but if they decide to I’ll let them know to do it over time like you said so it’s to my advantage! Thank you for that advice. I’ve also done a little research into down payments and PMI. I’m not sure if I will have the time to accrue a 20 percent down payment, but I read that you can also do a PMI buyout. In a perfect world, I would try to save around 15 percent of the mortgage and spend 10 percent on the down payment, closing cost, and PMI buyout. I would probably try to use the remaining 5 percent on furnishing and emergency/overlooked costs. I’m sure that doesn’t even account for things I’ve overlooked and I still need to save up for an engagement ring eventually! lol As I’m about to enter the “real world” I can see that it is a LOT and daunting! There is just so much to think about and prepare for.

As far as the car, I do have one. I pay for a portion of the payment with internship/Co-Op money and my parents pay the other part. The car should be paid off by the end of this year, but it is in my mother’s name so it doesn’t affect my credit at all. She did that just in case we were short one month on the payment and didn’t want it to negatively affect me just in case. :/ However, I think all the payments have been in full and on time and wouldn’t have affected me negatively, but I understand she wanted to be safe so that my credit wouldn’t be bad.

JLeslie's avatar

You don’t have to be in a big rush to buy a house. You just graduated! Save, maybe live with a friend for a while, save some more.

Do you think you might want to be with your gf forever? If so I assume that is past of the equation?

RedKnight's avatar

I do plan to save up for sure! I do want to be with her forever. :)

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