Your credit score affects the quality of credit you can get. Higher credit scores mean better interest rates and loan amounts, and a bad credit score can prevent you from getting credit cards or loans when you need them.
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Most people only consider their credit score when preparing to apply for a loan or other line of credit. While the best way to build credit is through a long history of reliability, knowing the fastest ways to build credit is essential if you need good credit fast. Here’s our guide on what works, what doesn’t, and potential scams you should avoid.
1. Always Pay Your Bills on Time
The most important factor when calculating your credit score is your payment history, which accounts for 35% of your final credit score. If you miss payments due to forgetfulness, consider setting up an automatic payments, which allows the bill holder to request funds directly from your bank on the bill’s due date. The one drawback of automatic payments is that if you don’t have enough funds when the payment is due, you will most likely have to pay additional fees, which can increase your financial burden.
If you’re missing payments due to a lack of funds on the due date, contact the bill holder as soon as possible to rectify the payment. Only missed payments older than 30 days affect your credit history, giving you a bit of leeway in making your payments.
2. Request a Credit Limit Increase
The second-most important factor when calculating a credit score is your credit utilization ratio. This refers to the ratio of debt you can have vs. how much of that debt you’ve used. For instance, if your credit card has a limit of $100 and you have a balance of $50, your credit utilization is 50%.
While paying your bills on time is an excellent long-term strategy, playing around with your credit utilization score can be one of the fastest ways to build credit and raise your credit score. Low credit utilization means a higher credit score.
By requesting a credit limit increase, you immediately affect your credit utilization. In our example, if you ask for a $50 limit increase on your $100 credit card, your utilization will drop from 50% to 30% because you’ve only used $50 of your potential $150 credit limit.
3. Get a Secured Credit Card
A secured credit card typically has a lower credit limit. It requires that you pay an up-front security deposit, which the bank will take if you default on your payments. Secured credit cards are easier to qualify for than traditional cards and have low credit limits, making them the perfect way of increasing your credit utilization score as long as you keep on top of your monthly payments. You could start to see your credit score increase within a few months.
4. Pay Off Your Credit Cards Strategically
Another way of boosting your credit score is to pay your credit cards off strategically. Since your credit card issuer only reports your balance once a month, paying the minimum balance right before this reporting is the best way to optimize your credit utilization.
Be careful with this strategy; it can turn into a situation where you pay off a balance but then use the credit card a day or two later to fund other purchases. This “rob Peter to pay Paul approach” can lead to a loop where you appear to have a good credit history. But you’re not actually paying your balances off.
5. Apply for a Credit-Builder Loan
Credit builder loans are one of the fastest ways to build credit and increase your credit score, especially if you don’t want to open a new credit card. With this type of loan, you decide on an amount and term for the loan and then pay your installment monthly.
Unlike traditional loans, these loans require you to pay the money upfront in installments, which you will receive back at the end of the loan term. The lender may report your positive payment activity, helping you build up a credit history without the risk of falling further into debt.
6. Report Your Rent and Utility Payments
If you’re still establishing your credit history and don’t want to get a credit card, consider using alternative data reporting services to track other payments, such as rent and utility payments.
While not as effective as other methods at rapidly changing your credit score, adding your cell phone accounts and other monthly payments can raise your credit score by up to 20 points within several months, which can be helpful if you need an extra credit boost.
7. Dispute Credit Report Errors
According to a recent Consumer Reports survey, approximately 30% of Americans have errors in their credit reports, which can have devastating consequences on your credit history. It’s up to you to regularly audit your credit report and file a dispute if you notice an error. While not one of the fastest ways to build credit, disputes are essential to ensuring your credit history is accurate and that your credit score reflects your credit history.
8. Become an Authorized User
Becoming an authorized user requires trust and someone, like a family member or friend, who is willing to add your name to their credit card. As an authorized user, you can use the credit card but aren’t responsible for making payments, even though the credit card’s credit activity will appear on your credit report. You can essentially “piggyback” off of someone else’s good habits.
9. Don’t Fall for Scams
Be vigilant for scams like buying a credit privacy number (CPN) or paying companies to lodge credit disputes on your behalf. Not only are these put together by scammers who want to part you from your hard-earned money, but you may also become a victim or perpetrator of identity theft.
These scams can often seem legitimate, but if it sounds too good to be true or the claims seem overblown, stay far away.
If you’re looking for the fastest way to build credit and improve your credit score, call Boost Your Score at 1-800-259-1270 to learn more!
Disclaimer: Boost Your Score does not offer financial advice. The information presented on this page is intended for general consumer awareness and does not constitute legal, financial, or regulatory counsel. This content does not represent the perspectives of any issuing banks. While the information might include third-party references or content, Boost Your Score does not validate or guarantee the third-party information's precision. Internal links are promotional content for Boost Your Score products. Please take into account the publication date of Boost Your Score's original content and any related content to fully grasp their contexts.
