How Long Does It Take to Build Credit to Buy a House? A Step-by-Step Guide

Building a credit history from scratch typically takes three to six months to generate a score, as creditors usually report to the bureaus every 30-45 days. Since your payment history—whether you pay bills on time—accounts for approximately 35% of your FICO® Score, establishing a track record is the critical first step toward qualifying for a mortgage. This guide provides a clear, actionable plan to build your credit profile effectively.

What is a Credit Score and How is it Calculated?

Your credit score is a three-digit number, typically ranging from 300 to 850, that lenders use to assess your reliability as a borrower. A higher score significantly improves your chances of securing favorable mortgage rates. The score is calculated by three major credit bureaus—Equifax, Experian, and TransUnion—based on several weighted factors:

• Payment History (35%): This is the record of your on-time (or late) payments.
• Credit Utilization (30%): This is the percentage of your available credit you are using. It is calculated across all revolving accounts.
• Length of Credit History (15%): This considers the average age of your open accounts.
• Credit Mix (10%): Having a variety of account types, such as credit cards and installment loans, can be beneficial.
• New Credit (10%): This includes recent applications for new credit, which result in hard inquiries.

How Can You Build Credit History from Scratch?

If you are starting with no credit history, a systematic approach is essential. Based on our experience assessment, the following steps provide a solid foundation.

1. Open a Secured Credit Card A secured credit card is a primary tool for establishing credit. You provide a refundable cash deposit (e.g., $200-$1,000) that acts as your credit line. By making small purchases and paying the balance in full each month, you demonstrate responsible credit use. Crucially, lenders report these payments to the credit bureaus, building your payment history.

2. Become an Authorized User Ask a family member with a long-standing, well-managed credit card to add you as an authorized user. Their positive payment history and the account's age can be added to your credit file, giving your score a boost. It is important to note that while helpful for building history, some mortgage lenders may want to see credit you manage independently.

3. Manage Your Credit Utilization Ratio Since this factor makes up 30% of your score, aim to use less than 30% of your available credit each month. Paying your balance multiple times within a billing cycle can help keep this ratio low. High utilization can negatively impact your score, even if you pay the statement balance in full.

4. Diversify Your Credit with a Second Account After 3-6 months of positive history with your first account, consider diversifying your credit mix. Options include:

• A second credit card with no annual fee.
• A credit-builder loan, offered by many credit unions. You make fixed monthly payments into a savings account, which you receive at the end of the loan term, building payment history in the process.

What Are the Best Practices for Maintaining Good Credit?

Building credit is only the first phase; maintaining it is an ongoing process.

• Automate Your Payments: Set up automatic payments for all bills to guarantee you never have a late payment reported.
• Monitor Your Credit Reports: You are entitled to a free annual report from each bureau via AnnualCreditReport.com. Review them for errors or fraudulent activity that could hurt your score.
• Keep Old Accounts Open: The length of your credit history matters. Keep older accounts open, even if you don't use them frequently, to maintain a longer average account age.
• Use Credit Reporting Tools: Services like Experian Boost can potentially add positive payment history for utility and streaming bills that are not traditionally reported.

Starting your credit journey early is the most effective way to ensure you are prepared when you decide to prequalify for a home loan. By focusing on consistent, on-time payments and managing your credit utilization, you can build a strong financial profile that helps you secure the best possible mortgage terms.