Is it possible to build credit fast? Yes, it is. However, it all depends on your definition of fast.
Depending on your situation it should take a few months to build your credit score. It, however, cannot be done overnight.
This post will help you with the strategies that will help you on how to build credit fast and efficiently.
You don’t build credit by being passive. There are some actions that you need to take. Otherwise, your credit rating will remain static or get worse.
What is a credit score?
A credit score is a three-digit number that represents a person’s creditworthiness.
The most commonly used score that comes from FICO ranges between 300 and 850.
This score is used by bank and lending institutions to assess the potential risk posed by lending money to consumers.
People with a FICO Score of 800 or above are considered to have an “exceptional” credit score.
Those with scores ranging from 740-799 are in the very good range.
Scores between 670-739 are considered good.
A score of 580-669 is considered fair.
However, a score lower than 579 is considered poor.
The FICO score is broken down into five factors with different weightings as shown below:
- Payment history (35 percent)
- Amounts owed (30 percent)
- Length of credit history (15 percent)
- Credit mix (10 percent)
- New credit (10 percent)
Besides FICO there are other organizations that have their own credit score algorithm and they include, VantageScore, Experian PLUS score, CE credit score, TransRisk, etc.
Why Is It Important To Build Credit Score?
Your credit score will affect so many areas of your life.
It affects things like loans, insurance, some jobs, and other bills. Your access and the rates you are charged for all these items are related to your credit score.
If your credit score is poor you are more than likely to be charged higher rates.
For instance, if you want a mortgage financial institutions are likely to lend you. at higher rates than someone with a good credit score.
If you have no credit score at all then the credit scoring algorithm won’t generate you a credit score until you have an active account for a minimum of six months.
Building a credit score from scratch
If you are building your credit score from scratch then you need to be aware of the minimum requirements before the algorithms start awarding you a score. Those requirements are as follows:
- You need to maintain an account for at least six months
- That account needs to be reported to credit bureaus that keep these scores within the past six months.
While it is possible to have a score within six months, in a majority of cases it will take at least six months before it happens.
Ways to Build Credit Fast (How To Build Credit Fast)
How to build credit fast is definitely on the minds of many young people and others with low credit rating. In order to build credit fast there are some steps that you need to take:
1. Acquire a secured credit card
The difference between a secured credit card and a normal credit card is that for this type of card you make a security deposit which is later used as your credit limit.
The issuer will report to the bureaus and in that way you build your credit history. If you use it responsibly you will have a good credit history.
If you already have a bad credit history acquiring this card may not be easy as only a few lenders can help you.
2. Find a co-signer
Another way to build your credit fast to ask a close relative or friend who has a good credit score.
You can ask that person to be a co-signer on a credit card. In this way, you can build credit by relying on their good credit score.
However, since this person will have access to your credit card you need to discuss with them first on how the card will be used.
The goal here is to make sure that your expenses are within certain minimum limits so that you don’t go beyond the limits sets.
It should also be pointed out at this moment that your co-signer is legally responsible for your debt.
You can also become an authorized user.
Another way to build credit is to ask a parent or close relative or friend to add you as an authorized user on one of their credit cards.
This effectively means that your actions as you use this card may affect their credit score too.
While being a co-authoriser may not have a major impact on your efforts to build credit in the short term, even its small impact can contribute to building credit.
3. Credit builder loan
If you do not want any of the above options then another way is to apply for a credit builder loan. You can get these loans from credit unions and local banks.
In this, you apply for a loan and once it goes through the borrowed amount is deposited into a savings account. Afterward, you will make payment until it is paid off.
You only access the savings account balance plus the interest it earned once you pay off the loan. The main purpose of this loan is to build credit
4. Pay your bills on time
One thing that you should always remember is that payment history comprises 35% of the score calculated by FICO.
FICO stands for Fair Isaac corp which is one of the biggest credit scoring companies. Therefore if you are to maintain or raise your credit score then you need to keep an eye on your payments.
One way to be on top of your payments is to consider setting up automatic payments i.e. standing orders or direct debits. In this way, you can avoid missing payments.
5. Use only 10% of your credit limit
For those that are starting from scratch, the advice is to make sure that they only use 10% or less of their credit limit.
Therefore if your credit limit 10,000 then make sure that your balance is less than 1000. This will ensure that you build a credit score fast.
If you use more than this then your score may not go up fast. Once your score reaches the highest limits then you can increase your limit.
I, however, recommend avoiding using credit cards. Here you are using a credit card just for the purposes of building your credit score.
6. Keep track of your credit report
One way to be on top of this is to open an account with one of the credit rating agencies such as Credit Sesame.
In this way, you might be able to pick up any red flags and to monitor if your efforts are paying off.
Your credit report might for instance alert you to problems with your credit card balance.
If this happens then you can take corrective efforts to sort it out. The report may also suggest ways where you need to improve to build it up.
How can I raise my credit score in 30 days?
There are a few things that you can do to raise your credit score in 30 days. Most of this has already been mentioned:
- Pay the amount owed on your credit cards. Most people advise that your balance should not exceed 30% of your limit.
- Negotiate with your lender to remove late payment on your credit report. This could the form of an agreement to accelerate your payments to the lender.
- Another thing you can do is to negotiate with your credit card provider to raise your limit.
- If you don’t have credit then get credit. Having no credit does not help your score. Show your creditworthiness by getting credit. However, be careful as you don’t want to be a slave to lenders.
How can I raise my credit score 100 points?
There is no hard and fast rule for this as it depends on the algorithm used but missing a bill can lead to a drop of a 100.
Therefore making sure that you don’t miss a bill going forward can help a great deal. I would also advise that once you have paid your arrears to ask your supplier to expunge that record in your credit file.
Which card builds credit fast?
To do this you need a secured credit card. When you use this responsibly it can help build credit fast as it is reported to credit bureaus. One such card is the Citi Secured Mastercard.
Related Post: Funny Credit Card Quotes
What is the fastest way to build credit from scratch?
There are a few things you can do to build your credit fast from scratch. Remember since you have not had any credit before your credit rating is basically zero.
Credit rating is based on how you handle loans and not rating you for not having any loans. You are therefore starting from a clean slate.
The steps below have already been pointed out in the earlier paragraphs but It won’t do any harm to repeat them here. These are specifically for someone starting from scratch and not someone who has messed up their credit.
- If you are just leaving college then I would advise you to first apply for a loan from a bank. Since you are just starting out the banks may not offer you a huge loan so be prepared for a small amount. This however doesn’t matter as the goal here is just to show that you are a reliable lender.
- Another thing you can do is to get a credit card. If you manage it well and are able to make your repayments on time it could improve your credit rating.
- If you cannot get a loan you can ask a friend or parent to make you an authorized user on their credit card. In this case, the owner of the card will be responsible for the repayments but you will benefit by being an authorized user. That is why it can be difficult to get someone who does not know you well to agree to this arrangement. Your parents however should be able to do it easily for you.
How fast can you raise your credit score?
For someone who is just starting out you can within a month raise your credit score easily depending on the steps you take. It will definitely not be a spectacular rise as for that to happen it usually will take months or a year.
I should however point out that you will not raise your credit if you have not used a credit card or borrowed from a bank or lending institution.
You, therefore, need to be patient but in my opinion, it is much easier if you are starting from scratch than when you have messed up your credit. If you have messed up your credit it is a slow process.
In that case, you might be able to raise it by a few points in a few weeks. However to be able to be in good standing then you may need a few months to reach that go. The credit rating agencies would want to trust you again and because of that, they would want to see how you handle your credit for a few months at least.
As pointed out earlier your credit score can affect many things in your life. Lenders first consult your credit score to determine if they can offer credit to you.
Having a low or no credit score can lead to high-interest rates for your mortgage and other loans. In some cases, you may be denied these services if your credit score is poor.
It is therefore important to find ways to build credit if you have none or if you want to improve it. I hope the ways mentioned above will help you to do that.
I hope you have enjoyed reading this article on how to build credit fast and that you will continue supporting this blog.
I have another article that you may be interested in as it is titled, How To Become Mystery Shopper And Make Extra Cash.