How Long Does It Take To Build Credit with a Personal Loan?

credit score report with dollar bills and calculator

When you’re in the early stages of establishing good financial standing and history, the burning question is, “How long does it take to build credit?” According to FICO, a widely used credit scoring model, you can establish a credit score within six months of having a reported payment history. 

It may seem ironic—needing a credit history to qualify for credit, but being unable to build that history without access to credit. However, there are practical steps you can take to work around this challenge. One of which is to use personal loans.

In this article, we will tackle the credit-building process and criteria, and how personal loans can help accelerate this journey for you.

How is your credit score calculated?

To understand the credit-building process, you need to see a breakdown of how the bureaus determine your credit score.

Payment history (35%)

This criterion is based on how you’ve paid your credit accounts consistently and on time. It also considers if you’ve had previous bankruptcies, delinquencies, and other collections.

Credit card use (30%)

The second significant factor is how much you currently owe compared to your total credit. Credit score calculations consider people who consistently use most or all of their available credit as possible risks.

How long you’ve used credit (15%)

The more time your credit accounts have been open and in good standing, the better it is for your credit. Lenders see someone who has consistently made payments on time for 20 years as less risky than someone who has only been on time for two years.

Credit mix (10%)

Lenders evaluate the risk of lending money by considering your capability to effectively handle different forms of credit, so it’s good to have a mix of revolving credit. This includes credit cards and retail store cards, along with installment credit, such as mortgages, auto loans, and student loans.

New credit applications (10%)

Each time you apply for credit, your credit score takes a minor hit. Before opening a new credit account, it’s wise to weigh whether having that additional credit is worth the potential decrease in your credit score.

Building Credit Using Personal Loans

When you get a personal loan, your payments are typically reported to the three major credit bureaus—Equifax, Experian, and TransUnion. When used strategically, personal loans can expedite the credit-building process.

Here’s how lenders might see your choice to take out and fully pay back a personal loan:

Building a payment history

Lenders want assurance that you’ll pay back what you borrow. Consistently repaying a personal loan can demonstrate to future lenders that you’re a trustworthy borrower. Since your payment history makes up 35% of your credit score, staying on top of your monthly payments is crucial.

Improving your credit mix

Having various types of credit accounts for 10% of your credit score. A personal loan can add diversity to your credit history, potentially boosting your credit score if your credit mix is limited.

Managing credit responsibly

Lenders judge how you handle credit—how much you borrow, your debt type, and your repayment habits. A personal loan can showcase responsible credit management if you borrow within your means and keep up with payments.

Lengthening your credit history

The length of your credit history contributes 15% to your credit score. If you lack a credit history, lenders may be cautious. A personal loan can extend your borrowing history and positively impact your credit score.

Two Types of Personal Loans for Building Credit

Using a personal loan to boost your credit can be done through two common options: debt consolidation loans and credit-builder loans.

Debt consolidation loan

Debt consolidation loans are straightforward—they help combine multiple debts into one. Say, you have two credit cards with balances and high interest rates. A debt consolidation loan allows you to borrow the needed amount to pay off both cards, simplifying your payments with a single fixed monthly amount. 

How it works

  • – You take out a loan to pay off existing debts.
  • – Your debts are consolidated into one monthly payment.
  • – Timely payments on this new loan contribute positively to your credit history.


  • – Easier management with a single monthly payment.
  • – Potential improvement in credit score through consistent payments.
  • – Paying off credit card balances lowers your credit utilization ratio.
  • – Improves your credit mix by showcasing a mix of revolving (credit cards) and installment (personal loans) debt.

Credit-builder loan

A credit-builder loan is specifically designed for those with limited or no credit history. It allows you to build credit gradually while securing a loan.

How it works

  • – You borrow a small amount, often held in a savings account.
  • – You make regular payments towards the loan.
  • – Once the loan is repaid, you receive the borrowed amount and your improved credit history.


  • – Establishes a credit history for those starting from scratch.
  • – Teaches responsible credit management through small, manageable amounts.
  • – Provides funds for your financial goals after repayment.

More Tips to Accelerate Building Good Credit

Here are other tips to help you cut the time it takes to build a solid credit history:

1. Set realistic financial goals

Establish realistic financial goals and work toward them. Having a clear financial plan can guide your credit-building efforts.

2. Regularly check your credit report

Monitor your credit report for errors or discrepancies. Correcting inaccuracies can positively influence your credit score.

3. Avoid closing old credit accounts

Closing old credit accounts can shorten your credit history, which can potentially impact your score. If possible, keep older accounts open and active.

4. Consider a secured credit card

A secured credit card can be a valuable tool if you’re just starting. It requires a security deposit but can help you build credit responsibly.

5. Seek professional guidance

If you’re unsure about the best steps for your unique situation, consider seeking advice from financial professionals or credit counseling services.

Build Your Credit with Payment1

Now we know how long it takes to build credit and how personal loans can help accelerate the process. The key is to use personal loans wisely and integrate them thoughtfully into your credit-building strategy. This will help you build a strong credit profile and get better financial opportunities in the future. 

Payment1 can assist you in establishing a robust credit history and score through our personal loans. Our adaptable payment plans enable you to make timely repayments, positively impacting your credit profile and advancing your credit-building journey. Connect with our knowledgeable lending team to commence your credit-building process with us today.