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In our world, building up an excellent credit score is a key step in “getting ahead.” In addition to providing a benchmark by which banks will determine whether they’ll consider providing you a loan, credit scores help you save money.
A strong credit score opens the door to other financial opportunities, such as credit card benefits and low interest rates.
Here’s how to build credit fast:
- Fully understand your current financial standing.
- Become an authorized user.
- Pay bills on time.
- Take a loan with a cosigner.
- Get a starter credit card.
- Request a higher limit.
- Pay down debt.
- Limit how often you apply for loans.
- Regularly check your credit score.
It’s been said that you need to have credit to build credit; while this is partially true, there are ways around it. Read on to find out what steps you can take to build your credit and your financial standing.
Why I like Credit Sesame:
Credit Sesame allows you to get your credit score for free without having to use your credit card.
Service: Free Credit Score
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1. Fully Understand Your Current Financial Standing
Before hoping to raise your financial standing, first, you must fully understand where you are currently. While it’s common to feel overwhelmed by the prospect of taking a deep, hard look at your finances, there are a few easy ways you can take to make the process less daunting.
Get a Free Credit Check
Did you know that you’re entitled to a free, yearly credit report? It’s true! All you have to do is go to creditsesame.com to have a full report done through Equifax, a trusted credit site.
For a short time, this account is providing credit checks weekly to help consumers keep track of their finances in the wake of the Covid-19 pandemic.
Though an occasional credit check is an innovative, vital way to keep track of your finances, you’ll want to be careful that the site you’re giving your information to is credible. Scammers may attempt to use copycat websites to steal your data!
Annual Credit Report is currently the only website authorized by the federal government to provide safe, thorough credit report checks. This free report may not include your actual score, but by checking it, you can best understand what exactly you need to do to get your finances in control.
Identify Any Errors on Your Credit Report
Your credit report will provide information about any accounts or balances that have ever affected your credit.
This list should include:
- Payment history
- Length of credit history
- Outstanding balances
- Applications for new credit cards
- Types of credit accounts
If any of the information on the report seems inaccurate, you must report this discrepancy immediately. To do so, write a letter of dispute and send it to the agency responsible for your credit reporting.
Be sure to keep a thorough record of all correspondences with this agency until the debate is declared settled.
Examine What Accounts Are Affecting Your Credit and Take Action
Now that you have the information about what accounts are negatively affecting your credit score, it’s time to put in the hard work of doing something about it.
Is there any place where you can cut expenses? If the problem is that you’ve got multiple credit cards to different individual stores, it may be time to cancel those.
Even if each store credit card has a balance, you should remove the physical card itself from a position where you can easily reach for it in moments of temptation and build up that balance even further!
If the bigger issue is that you don’t have any credit, you should take the opposite step; build up your credit by taking out smart, forgiving loans or piggybacking on another loan with a willing friend or family member.
2. Become an Authorized User
An authorized user is a person added as an additional cardholder to someone else’s preexisting account. As an authorized user, you can make charges without being responsible for paying the bills themselves!
In this way, authorized users can piggyback off another cardholder’s credit without running the risk of damaging their own.
When you become an authorized user, it’s important that it’s under someone you know well and fully trust. In return, you should take steps to remain someone trustworthy as well.
Don’t overspend or run up major bills, risking your friendship as well as the chance to continue taking advantage of this opportunity!
Becoming an authorized user on a preexisting account is fairly easy. Usually, it’s a fast, easy process that the cardholder can complete online or over the phone. If accepted, you’ll receive your card in the main within one to two weeks.
3. Pay Bills on Time
One of the single most significant steps you can take to improve your credit score is simply paying your bills on time.
On this front, it’s wise to understand which bills affect your credit score and which don’t. When focusing on raising your credit score, remember to prioritize the following:
- Cell phone
- Car payments
- Credit card bills
- Student loans
Even though rent and utility bills technically don’t involve a loan of any sort, they have a direct tie to your credit score. Remember to include all bills in your monthly budget, not just the ones that include high-interest rates!
4. Take a Loan With a Cosigner
This method of raising your credit score is very similar to becoming an authorized user on a pre-existing credit card, but in this case, you’re on the hook for making sure that this loan is paid back promptly.
By taking a loan with a cosigner, you may be able to improve your credit score with the assistance of a trusted family member’s steadier, higher score. While not every bank will approve a loan between two people -- particularly if the link between them is neither legal nor genetic -- it can be a great way to build up your credit.
Though this method is time-trusted, you shouldn’t undertake it lightly. Unless you have a great deal of trust in the person you’re signing this loan with; you should avoid linking your credit to theirs, mainly if the return payments on this loan are split.
Just as they can help you improve your low score, they can also tank it by refusing to meet their end of any bargain.
5. Get a Starter Credit Card
Credit serves to prove to a bank or other financial organization that you can be trusted to pay back the money you’ve borrowed. The best way to build that trust is through tiny, incremental steps, including signing up for your first credit card.
Starter credit cards are great for those just beginning to build their credit. These cards typically have relatively low annual fees as well as low spending limits. Though you won’t be able to take out vast amounts of money using this card successfully, you’re also far less likely to dig yourself into a deep hole of debt.
When looking for a starter credit card, you should primarily look for one with incredibly low-interest rates. These cards won’t offer much in terms of rewards, but everyone has to start somewhere.
Remember, this method is best for someone who’s just starting out. If you’ve already gotten a credit card and have found a happy balance of paying off your existing debts, it may be time to take things a step further.
6. Request a Higher Limit
By requesting a higher limit, you allow yourself more wiggle room in terms of spending. If building credit is a game of trust, you’ll need to demonstrate that you’re capable of handling larger amounts of freedom with your credit card in order to show banks that you can show the same fiscal responsibility with larger loans.
When you first sign up for a new credit card, your spending limit will be relatively low. Typically, credit card companies will issue scheduled, annual credit limit raises over time, though occasionally, events can lead to a spur of automatically increased limits.
Suppose you’re already in a position where you’ve been building your credit score and paying your bills on time. In that case, it may be an excellent opportunity to expand on that responsibility with a higher credit score.
To request a higher credit score, contact your credit card company either online or over the phone. They may ask your reasoning why in which case you’ll be expected to make a case for why financial corporations should trust you with an increasing amount of money.
During this conversation, be sure to have the following handy:
- Annual income
- Proof of employment
- Mortgage or rent statements
- Suggested credit limit
Before taking this step, you must dedicate yourself to not abusing this newfound freedom. This card exists to build your credit and should be used primarily on required expenses like groceries, gas, and maybe regular utility bills.
It’s not to be used on spending splurges or to temporarily pay off the debt you’re unprepared for at the current moment.
7. Pay Down Debt
You’ve done the work. You made the foundation, prepared your expenses, and stuck to a regular budget. Now, it’s time to pay off that excess debt.
While you should concentrate the most on paying off accounts under high-interest rates, it may also be a good idea to pay off any charges that can quickly be closed afterward.
That Dillard’s credit card with a pesky seventy-five dollar balance you keep forgetting about? Pay it off, then close the account.
That parking ticket from years ago you never remembered to pay? Take care of it now before it can ding your credit even further.
Looking for tips on how to pay off debt quickly? Look no further!
- Focus on the most expensive debt
- When possible, pay more than the minimum
- Budget as much into debt as you can before adding to your savings
- Avoid online shopping
- Take advantage of debt repayment apps
- Eliminate unnecessary bills or subscriptions
Stick to a budget, create a schedule, and be diligent in sticking to both. With perseverance, you should be able to pay down any existing debt in no time.
8. Limit How Often You Apply for Loans
This advice may seem contradictory, but after you’ve taken out the starter credit card or cosigned loan, you should temporarily step away from any loans that may involve opening your current credit score up to scrutiny.
Whenever you apply for an actual loan, it results in what’s known as a “hard credit check.” While “soft credit checks”-- including employment applications and checks for insurance-- don’t affect your credit score, “hard credit checks” may.
A hard credit inquiry is run whenever you apply for any sort of loan or card, including mortgages, credit cards, or even small personal loans.
While it may not be fair, it’s for a reason. According to FICO, people with five or more hard credit inquiries are six times more likely to fall behind monthly payments.
Applying for too many loans or credit cards sends the message to banks that you may be in financial trouble and looking for a way out.
9. Regularly Check Your Credit Score
Once you’ve created a budget and learned the ropes, it’s just time to sit back, make your payments, and lay low until your credit score has built itself to where you want it.
Your only other absolute obligation is to continue checking your credit score periodically to ensure that it increases as you planned.
Managing finances can be stressful, particularly if it’s not a skill you observed growing up. With time and patience, anyone can learn to get their money under control, pay down debt, and develop a strong credit score.
When trying to build credit fast, it’s vital to remember that it isn’t an overnight process. It’s going to take time and deliberate steps.
By taking advantage of the opportunities around you and starting with a strong base, you can build the credit you need to achieve whatever your financial goals may involve, whether that’s a low-interest mortgage or simply a new car.
Credit Sesame helps you access, understand, leverage, and protect your credit all under one platform - free of charge.