How can I build my credit fast?
Posted by Rohit Mittal
A bad credit score can make life really frustrating. Especially if you need to get a loan, or you are applying for a new job and don’t have a lot of time to improve your score. Fortunately, there are ways to build credit quickly. Below we provide a few tips on how to build credit fast which you can apply to your own credit score.
Table of Contents
11 Ways to Start Building Your Credit Today
1. Dispute Errors
One of the first steps to building credit fast is to make sure the information on your credit report is correct.
You can get one free credit report each year from each of the major credit reporting companies. These are Equifax, Experian, and TransUnion. Once you get the report, go over it with fine detail. Be on the lookout for any accounts showing late payments or unpaid bills.
If the information is incorrect, you can dispute it. The report should indicate how you lodge disputes. Don’t stop hassling them until the errors are removed or corrected as these errors could have already influenced your credit score negatively.
Before you negotiate for better terms or rates, it’s important to remember the past is the past. You can’t negotiate yourself into a better credit score, but you can negotiate for a better rate on outstanding loans you want to pay off. Start by educating yourself on how to approach negotiations with creditors.
You can then aim to get better interest rates or lower outstanding amounts with offers like an earlier settlement offer. Whichever way it goes, get the agreements or negotiation in writing as soon as you can. And don’t pay anything until you have the agreement in writing.
3. Check Your Limits
Make sure the credit bureaus and other credit providers know what your current credit limits are on your credit facilities. If these are outdated and are actually higher than what is recorded, it will look like you have exceeded your limits when in fact you didn’t. If so, you will be marked as a high-risk borrower.
4. Become an Authorized User
Becoming an authorized user means being added as a user to someone’s credit card account. This is a great way to build credit. The tricky part might be finding someone who is willing to do this – especially if you have a bad credit history.
For this to work, the person whose card you are using must have a good credit report and score. This account will show up on your credit report. All on-time payments of this account (by the primary account holder) will be recorded on your credit report and boost your credit score.
5. Stay Under Your Limit
Credit utilization has a big impact on your credit score. This is just a fancy word to say how much of your credit you are actually using. Maxing out all of your credit cards will give your credit score a negative bump. Ideally, you should only be using 30% of your credit limit or less. This will reflect positively on your credit score.
6. Increase Your Credit Limit
Your credit limit will help lower your credit utilization, which will reflect positively on your credit score. This will only be a good idea, however, if you have the discipline to not spend your new available balance. If you immediately spend your new balance you’ll be back to square one.
7. Open a New Account
If increasing your credit limit doesn’t work, you can still improve your credit utilization by opening a new account. Your credit utilization rate is determined by taking all of your credit lines into account. Don’t open too many at once though, as this will have the opposite effect you are working towards. Just go for one or two at a time.
8. Keep Your Credit Card Accounts Open
If you pay back a credit card and close the account, this will cause your available credit to drop. That will cause your credit utilization to increase, which is seen as a negative by the credit bureaus.
9. Take Care of Past Due Bills Immediately
The payment terms you agreed to when getting credit are part of a contract with your credit provider. This means if you don’t pay you are breaching your contract. That is why your payment history will have the biggest influence on your credit score.
Once you pay overdue bills, ask your creditor to clear the bill on your credit report. Even though missed payments stay on your report for seven years, having them cleared will help boost your credit again.
10. Pay Your Bills On Time
As mentioned above, your payment history has the biggest influence on your credit health. Your payment history can make up to 35% of your FICO score. Adjust your budget to prioritize your loan repayments before things like luxury expenses. If you don’t pay your bills on time, the missed payments will be recorded on your credit report and bring down your credit score.
11. Pay Your Bills Twice per Month
By paying your bills twice per month, you prevent additional interest charges from accruing on a higher outstanding balance. This also reduces the high outstanding balances credit bureaus will record for your profile. It always takes a while for your updated balance to reflect on your credit report as creditors only report your balance to the credit bureaus once a month.
So, if you make two payments per month the running balance on your credit will be lower. A lower outstanding balance (and credit utilization rate) will, therefore, be recorded on your report.
It’s always a good idea to improve your credit score. But doing so quickly needs a bit more careful planning. Keep in mind, however, the process of building credit fast is relative to your credit health situation. Although the strategies we explained above will definitely work to build your credit, not all will be instant when your credit health is already poor. Some of the changes might only reflect after a month or two. But if you commit to these methods, you will see an improvement in your credit score in no time!