Published: October 24, 2021
Did you know that there are proven ways to build your credit score quickly?
We realize that many people would love to boost their credit, especially those struggling to qualify for a loan, lease, or credit card. Therefore, we’ve created this guide of the ten most effective ways to help you build your credit as fast as possible.
Let’s get to it!
1. Get Your Credit Reports
First of all, you need to know where your credit score stands. To do that, you’ll need a copy of your annual credit report to verify its accuracy. Namely, you should request one from each of these credit-reporting agencies — Experian, Equifax, and TransUnion.
Once you receive your reports, you should inspect all three, paying close attention to these details:
- Number of closed accounts
- Credit card accounts and balances
- On-time payments
- Open accounts balances
- Personal information is the same in all three reports (name, address, SSN, birthday, etc.)
If you discover any discrepancies, you should immediately contact the corresponding agency to file a dispute and work with them to help repair your credit score.
2. Never Miss Your Payments
Remember that your payment history is the most significant factor when building credit since it makes up about 35% of your total credit score. Furthermore, unpaid or late payments can remain in your credit reports for up to 7.5 years.
That being said, promptly paying all of your bills is crucial and the fastest way to improve a credit score. In fact, you should consider setting up an automatic payment plan by connecting your bank account to your loan provider.
They can then automatically charge your account on or before the due date, ensuring that your payment will always be on time.
Another helpful suggestion is to employ the help of an online bookkeeping service that could supply you with the correct tools and accounting habits to avoid having any credit rating issues in the first place.
3. Bring Your Past-Due Bills Current
Speaking of missed payments, sometimes, unavoidable circumstances happen in life, and bills accumulate. Since late payments can remain in your credit history for over seven years, it’s a great help in improving your credit score to bring all your past-due bills current.
That way, you can also prevent further late payments from tarnishing your credit rating.
4. Strategize Your Credit Card Utilization
Around 65% of small businesses in the US use their business credit cards to fund their business expenses. Unfortunately, this puts their credit score at risk because of over-credit utilization.
Credit utilization is basically the percentage of your maximum credit limit that you are using at any given time. It’s also the second most influential factor to your credit score. In order to help boost your credit score, you should consider strategizing your credit card usage.
Below, we’ll look at a couple of easy ways to accomplish this:
Always Stay Below Your Maximum Limit
Use at least less than 30% of your credit limit. Those who have the highest credit scores use less than 7% of their credit utilization.
Pay Off Your Balances on Time
The less of your maximum credit you use, the less your balance will be. That makes it much easier for you to pay it off within the billing cycle.
Credit card companies report your balances to the credit bureaus, which in turn use that info to calculate your credit score. Therefore, you should keep them as low as possible.
A helpful tip is to add alerts to your credit card accounts or set a reminder in your calendar to avoid forgetting to pay. This strategy is also one of the best ways to go about building business credit.
5. Pay Off Your Debts
Another excellent way to raise your credit score is to pay off your debts. You can make smaller payments more frequently than the usual and more substantial monthly payment plan if necessary.
We realize that this may be challenging as you may not have the extra money to do so. However, we discovered some strategies to pay off your debts without having to cut off much of your necessary expenses.
Here are some debt relief programs you can consider.
Debt Avalanche Method
This method is when you pay off your debts with the highest interest first, then pay off the following higher interest ones, etc. Nonetheless, you must continue paying at least the minimum amounts on any other cards to avoid penalties.
Make sure to do so on time because, as we mentioned earlier in this guide, it’s one of the quickest ways to improve your credit score.
On the other hand, the snowball method focuses on paying off your smaller debts first while still meeting your monthly minimum payments for the rest of your cards or debts.
This technique can help build momentum as you slowly achieve your goal of paying your debts one after the other.
Debt Consolidation Loan
Yes, it’s another loan, and you might think you’re just adding more debt instead of being able to pay it off.
On the contrary, it’s not like other types of loans, such as a business loan that will be an additional debt, but rather, all of what you owe will be consolidated.
This means you will have only one bill to pay a fixed amount in one month, relieving you of the burden of missing any payment so you can fix your credit fast.
Debt Management Plan
In a debt management plan, a counselor will manage your debts on your behalf. They will negotiate with your creditors to lower your interest rates, fees, or even monthly payments.
You will have a much simpler payment scheme as you will only have to pay the credit counseling agency.
However, you will have to close all your affected credit cards, which may impact your credit score. There’s also a setup fee and a monthly fee for participating in a debt management plan.
6. Be an Authorized User
Being an authorized user means that you will have to ask someone to add you to their existing credit card account. But, you must choose someone close to you who has a high credit limit and satisfactory on-time payment history.
Their credit card account will appear on your credit reports. The high credit limit can help your credit utilization improve. That’s why becoming an authorized user is one of the most efficient strategies to improve your credit score.
You don’t have to use the card or even know the account number for this method to help improve your score. Plus, the impact is pretty quick! As soon as you’re added, and the account’s reported to the three bureaus, it will appear on your credit report.
7. Obtain a Secured Credit Card
A secured credit card works the same way as other credit cards. You can use it for your in-store or online purchases, the same as with traditional credit cards.
The difference is that with a secured card, your credit limit is the amount of cash collateral you provide upon obtaining it. So, for instance, if you deposit $200, that amount will serve as your credit limit.
However, it’s crucial to remember to keep your credit utilization below 30% to improve your credit score and help boost your overall rating.
8. Ask for Higher Credit Limits
Here’s yet another effective way to increase your credit score. The idea behind this method is to get a higher credit limit but maintain your current balance. Therefore, you can raise your credit score by instantly lowering your credit utilization.
But beware, this technique doesn’t come without some risk! Because when you ask for a higher credit limit, your creditors will likely run a “hard” credit inquiry before approving your request, which could actually drop your score to up to five points.
So, once your credit limit increase is approved, make sure to maintain a low balance, or this strategy won’t work. In other words, if you keep your purchases low while having a higher limit, then you’re on your way to a better credit score.
9. Apply for a Secured Loan
A secured loan is also known as a credit-builder loan. And if you’re wondering how to increase your credit score fast, this is one of the best strategies to employ.
In a secured loan, you will have to deposit money into a secured loan savings account, typically a few hundred dollars, to serve as collateral. However, unlike other loans, you will not receive the money upfront.
Instead, you’ll need to make on-time monthly payments to the lender. They will, in turn, report this to the three credit bureaus. Once the term is completed and you have paid the loan in full, you will get your deposit back, minus the fees.
It’s an excellent way to prove that you can pay a loan, therefore giving your credit score a boost.
10. Consider Reporting Your Rent and Utility Payments
If you can show that your rent payments are made on time, this could also be a convenient way to build up your credit score. You’ll need to inform the proper reporting agencies so they can add them to your credit report.
However, not all scoring models, such as FICO 8, recognize rent payments as a valid method to improve your credit score. Regardless, having it on your credit reports will be of great help to improve your overall score.
On the other hand, if you have an Experian account, consider registering with Experian Boost. It’s a free service where you can link your bank accounts so they can evaluate your utility, streaming services, and phone bills.
Be sure to add the ones with a good payment history so that your credit score will benefit from them.
Whether you have a poor credit rating or not, knowing how to build credit fast can be a valuable tool for when the time comes to lease a car, acquire a loan for your dream house, or obtain a low-interest credit card.
We sincerely hope that our guide will help you achieve the overall credit rating that you desire.
What is the quickest way to build credit?
If you’re searching for the fastest way to build credit from 0, you should consider opening a credit card account. However, remember to keep your utilization ratio as low as possible and always make your payments on time to achieve the best results.
Keep in mind that it could take several months to reach your desired score. But if you diligently follow the suggestions in this guide, you’re sure to achieve it.
How to increase credit score to 800?
An 800 credit score is considered a perfect rating. That means it may take you several months or even years to achieve it, especially if you currently have poor credit.
However, if you consistently follow our tips on how to build credit fast, you’ll be on your way to increasing your credit score gradually until you reach 800.
Does paying off collections improve credit score?
It all depends on the scoring model and whether the collector chooses to keep reporting the account.
Therefore, paying off collections may help improve your credit score, but it’s not going to be as quick as you’d like it to be. It’s a serious negative mark and can take years to be removed from your credit report.