How To Build Your Credit Faster

A good credit score shows a person’s creditworthiness, which offers scope for lower interest rates while applying for a loan

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If your credit score is not where you want it to be, there are many ways that you can do to improve your score.

How Fast Can You Build Your Credit?

A credit score takes time to build and improve. While you can’t transform your score overnight, you can see dramatic improvement with steady and consistent efforts. If starting from zero, you can expect to build a decent credit score in six months. 

For the major credit scoring companies to compile enough history of your credit use for a score, you need at least one active account open for a minimum of six months. If you’re trying to repair damaged credit, the longer you have to rebuild it, the better, but you can start to see improvements within three months. Of course, you can use services from credit repair companies in Austin, Texas to help you build credit.

What Can You Do to Boost Your Credit?

Consistent, steady improvement will do the most to improve your credit over time. Nothing happens overnight regarding your credit score, but some things contribute more than others. Here are some ways you can more easily increase your credit:

Apply for a Secured Card

If you want an easy instant boost to your credit, apply for a secure credit card. These cards require a cash deposit upfront as collateral against the purchases you’ll make. The benefit of this card is your ability to control the credit limit by paying a higher security deposit. 

One of the factors in your credit score is how much credit you use. It’s best to stay under 30%, so if you apply for a secured card and place $1,000 as your security deposit, keep your credit usage under $300. If you consistently stay under 30% credit utilization each month, you'll see your credit score improve.

Become an Authorized Credit Card User

This is an effortless way to build your credit, so long as you choose the right person’s credit card. By becoming an authorized user on a friend or relative’s credit card, their credit utilization and history of payment will be reflected in your score. If you have a little credit history, using this tactic works well.

To do this right, you’ll want to make sure you choose someone with a credit card with a consistently low balance, a history of no late payments, and a high credit limit. Do not sign on to another person’s card if they have a history of poor credit utilization. Their credit behavior, good and bad, will be reflected in your score.

Ask for a Raise in Credit Limit

If you constantly struggle to stay under your credit limit, apply to your credit card company for an increase in your credit line. A higher credit limit can help improve your score by lowering your utilization. When your credit line increases, the increase is also reflected favorably on your credit score. An increase in credit demonstrates that you are viewed as a stable cardholder by credit card companies.

Correct Wrong Information on Credit Reports

There are many ways to track your credit score. Popular websites and apps like Experian and Nerd Wallet offer free credit score tracking–but why is monitoring your credit score important? Knowing when incorrect information is entered into your score is vital for getting it fixed. 

Though it may not happen often, there are times when incorrect information may get entered into your credit report. When this happens, your score could be negatively affected. The only way to reverse this is by having the credit scoring companies such as Equifax, Experian, and TransUnion remove this information. 

Removing false information from your credit score usually takes more than a phone call to point out the mistake. There will be checking, referencing, and the potential for documentation needed from you. It will take some time to remove the incorrect information, and your score will be repaired. Getting the process started as soon as you notice an inaccuracy pop-up is the best to get your score back to normal quickly.

Make Payments on Time

Your payment history is one of the most significant factors when improving your credit score. On-time payments will always contribute to improving your score. If you make a habit of missing payments, your score will continue to go up. When it comes to payments, you should always pay at least the minimum, as noted on your credit statement each month. Paying more than the minimum is advisable to reduce interest payments and lower your credit utilization, but if you can only do the minimum, it’s best to at least do that.

It may not seem like a big deal to miss one or two payments, but a late payment can cause a drop in your credit score, ranging anywhere from ninety to 110 points. That’s enough to take you from a “good” rating to a “fair” rating and instantly increase interest rates on loans or even disqualify you from obtaining loan approval. Though the score will rise again as you faithfully make payments, you could feel the effects of late payments for as long as seven years. 

Applying Credit Utilization

Credit utilization depends on how much credit you use compared to your credit limit. Low credit utilization is beneficial; generally, you shouldn’t use more than 30% of your limit. If you have a credit limit of $1,000, you should keep your credit under $300 each month or until you pay it off. Low utilization sends the message that you know how to manage credit well and aren’t at risk of borrowing more than you can pay back.

Improving your credit score takes time. Being financially responsible and practicing the steps outlined in this article will help you boost your credit, and while there are many things you can do on your own, if you’re still at a loss, it could be best to hire a reliable credit repair company, such as The Phenix Group, to help you out.

Pay Off Your Debts as Soon as Possible

Paying off your debts is the biggest contributing factor to building your credit score fast. Because 35% of your credit score directly comes from payment history, paying off debt (such as student loans and other loans) is arguably the best way to build your credit.  A great way to tackle this goal is to make monthly or biweekly payments to hack away at the balances.

Reducing credit card balances is also something you can do to improve your credit score, especially in the short term. You can automate your payments to streamline and quickly pay off debts, as well as to prevent missing a payment because you forgot to make a manual payment.

Don’t Use More Than 30% of Your Available Credit

Try your best to keep your credit balance well below your credit card limit. The ratio between your credit limit and the amount you usually owe significantly influences your credit score. Having your monthly credit score too close to your credit limit can negatively impact your credit score. The best way to speed up your credit building is by cutting your balances to 20% of the credit limit. 

Keep Your Credit Cards Open

While many people may think having fewer cards is more practical, having more than one open account will boost your credit score if you manage them correctly. How long you maintain your credit account is crucial in determining your credit score—the older your credit history is, the more attractive you look to a lender.

Rather than closing an account you don’t use anymore, it might be more beneficial to keep it open. Closing a card will lower your overall credit limit and possibly impact your overall credit utilization ratio. This, in turn, will decrease your credit score.

Report Your Rent To Credit Bureau

A great way to build your credit score is to report your rent or utilities expenses to a credit bureau. Try services that report rents to credit reporting agencies. These services process the rent and utility billing data and send it to the monthly credit reporting bureau.

Experian Boost is one free service you can use to boost your credit score. If you have a thin credit file, it can almost instantly increase your credit score by eight to nineteen points.

Apply For Credit Builder Loan

Credit builder loans are loans designed to help borrowers with zero credit history who are hesitant to open a credit card. First, you’ll have to decide on an amount and term. After that, you get the money upfront and return it every month. The lender then reports the on-time payments to the credit bureaus; by the time you’re done, you have increased your credit score. 

It’s also important to understand the difference between pre-qualified and pre-approved if you are interested in taking out a loan.

Final Thoughts

Building your credit score takes time and patience, but is very important. It’ll help you qualify for major loans in the future, such as home or car loans. If you follow the instructions above, you can significantly speed up the process. 

Now that you know how to have a decent credit score, you might want to know the credit score you need to buy a car.

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