How Long Do You Need an Active Credit Line to Achieve a Valid Credit Score?

Nearly every American adult has a credit score, but few know what it is or why it is so important. Lenders use credit scores to evaluate how likely you are to repay any money they lend you. Scores are computed using factors from your credit history, such as how good you are at making payments, the amounts you borrow, how long you've had credit, how much new credit you have taken on and which types of credit you have used.

Why It's Important

A low credit score can prevent you from receiving the lowest interest rates, which means you'll pay more money on interest over the course of repaying your loan. Scores range from 350 to 800, but the gap between a "risky" 620 and an "excellent" 750+ is a mere 130 points. In addition, your score may vary between the major credit reporting agencies because each agency only uses the information they have in computing the score.

What's Important

According to FICO, the length of your credit history accounts for only 15 percent of your total credit score. The quality of your payment habits and the amount of credit you carry are much more important, together comprising 75 percent of your score. Six months should be viewed as the minimum amount of time required to establish a credit score, if for no other reason than sometimes it takes that long for your information to reach the reporting agencies.

Tips for Establishing Good Credit

If you cannot qualify for a credit card, apply for store credit or take out an installment loan. Never max out your credit limit. Good scores are bestowed on those who use just 30 percent of their available credit. Don't open several new accounts all at once, and don't apply to tons of lenders at the same time. Of course, the most important action you can take in establishing a high credit score is to always pay your bills on time. Be proactive; educate yourself about how credit works and how it affects you (see Resources).