Starting from zero, building a credit score takes about three to six months of using credit, says Experian®. But getting an excellent score takes longer. If you're new to credit, it might take six months to a year to hit a respectable score of around 700 with FICO® or VantageScore® models.
The longer you've been using credit, the more it means to your credit score. Members of the 800 Club average just under 22 years of using credit. Even the youngest ones, Millennials, average more than 14 years.
What's a good credit score for a 20-year-old? Consider yourself in “good” shape if your credit score is above the average for people in your age group. Given that the average credit score for people aged 18 to 26 is 680, a score between 680 and 690 (the average for people aged 27 to 42) could be considered “good.”
Even better, just over 1 in 5 people (21.2%) have an exceptional FICO credit score of 800 or above, all but guaranteeing access to the best products and interest rates.
You'll have enough credit history to generate a score when you've had a credit card or loan for six months. But your score won't start at zero, or even the lowest FICO score (300). Your first credit score will likely fall somewhere in the middle of the credit range of 300 to 850.
You simply won't have a score at all. That's because your credit scores aren't calculated until a lender or another entity requests them to determine your creditworthiness.
Reducing your balances is the most effective way to boost your credit score. Provided you have no derogatory marks on your credit reports, such as late payments or delinquencies, you are likely to see a jump in your scores quickly if you knock down your balances to or close to zero.
If you missed a payment because of extenuating circumstances and you've brought account current, you could try to contact the creditor or send a goodwill letter and ask them to remove the late payment.
Key takeaways
No credit means you don't have enough credit-related activity to generate a credit score, but bad credit means there are blemishes on your credit report. Whether you have no credit or bad credit, there are ways to build your credit score, including making timely payments and becoming an authorized user.
Depending on your unique financial situation, it can take anywhere from one month to a few years to improve your credit score. Improving your credit score isn't something you can achieve overnight, but don't let that dishearten you. Every credit score can be improved with a little commitment and perseverance.
Still, you typically need a good credit score of 661 or higher to qualify for an auto loan. About 69% of retail vehicle financing is for borrowers with credit scores of 661 or higher, according to Experian. Meanwhile, low-credit borrowers with scores of 600 or lower accounted for only 14% of auto loans.
In some countries that use other models, like Canada, people could have a score of 900. The current scoring models in the U.S. have a maximum of 850. And having a credit score of 850 is rare. According to the credit reporting agency Experian, only about 1.3% of Americans have a perfect credit score, as of 2021.
South Burlington, Vt., is the city with the highest credit score, while Detroit is the city with the lowest, according to personal finance site WalletHub.
Conventional loans typically require a minimum credit score of 620, though some may require a score of 660 or higher. These loans aren't insured by a government agency and conform to certain standards set by the government-sponsored entities Fannie Mae and Freddie Mac.
That means paying off debt in collections won't improve your score. A collection account remains on your credit report for seven years from the date the debt originally became overdue.
Overall, Credit Karma may produce a different result than one or more of the three major credit bureaus directly. The slight differences in calculations between FICO and VantageScore can lead to significant variances in credit scores, making Credit Karma less accurate than most may appreciate.