How To Build Your Credit Fast

Building a solid credit score is vital for your long-term financial future. Credit scores determine your eligibility for loans, credit cards, mortgages and even rental applications. A high score ensures a higher likelihood you will receive a loan or get approved for a credit card. There is also the potential that with a higher credit score, you may secure lower interest rates and terms, which could save you money over time.

If your credit score is low, you should try to improve it as quickly as possible. It can take as little as a month to see an improvement to your credit score, but it could take longer, depending on where you start and the steps you take.

This guide covers:

• What goes into your credit score
• Seven ways to improve your credit score quickly
• Mistakes to avoid.

What Goes Into Determining Your Credit Score?

There are various models that can be used to determine your credit score, but the most common are FICO and VantageScore.

There are five factors that go into determining your FICO score. They are:

• Your payment history: 35%
• The amount you owe on all your accounts: 30%
• The length of your credit history: 15%
• Your credit mix: 10%
• New credit: 10%

Your VantageScore includes six factors. They vary slightly depending on which VantageScore version you’re looking at — 3.0 or 4.0. These are the factors for version 4.0, which was introduced in 2017.

• Your payment history: 41%
• Depth of credit, or the age and variety of your credit accounts: 20%
• Your credit utilization: 20%
• Recent credit: 11%
• Your outstanding balances: 6%
• Your available credit: 2%

The percentages are a guide — some categories matter more for some people than others. For example, for younger borrowers, the length of your credit history may be less important than it would be for someone older.

Payment history will always be the most important factor, so make sure you pay all your bills on time. You can’t go back in time, so if you’ve had late payments in the past, start making all your payments on time today.

It will take some time to change things like your payment history and the length of your credit history. But you can take some actions that will have a quick impact on your new credit and the amount you owe on all your accounts.

How To Improve Your Credit Score Fast

Follow these seven steps to improve your credit score as quickly as possible.

1. Pay Bills on Time

The number one best way to build credit is to simply make on-time payments and reduce your credit card balances. Payment history is updated frequently on your credit report and builds a record of reliability.

Late payments stay on your credit report for seven years, but their weight on your score decreases over time. Also, if you make the payment within 30 days of the due date, it generally won’t be reported as late on your credit report.

If you struggle with making on-time payments, consider setting up autopay through your bank or the creditor. Or, if you prefer not to set up autopay, set up calendar reminders that will notify you when payments are due.

2. Keep Credit Utilization Low

Your credit utilization ratio is the percentage of total available credit that you are using. It is one of the key factors that composes your credit score. It accounts for 30% of your FICO score. A lower utilization rate shows you manage your credit responsibly.

This is how to calculate the credit utilization rate:

• Add up the total balance on all your credit cards.
• Divide this total by your combined limits.
• Multiply by 100 to get your percentage.

Keeping your credit utilization between 1% and 10% is ideal for your credit score, and 30% or higher will have a stronger negative effect on your score. You can lower your credit utilization by paying off balances as quickly as possible without taking on new debt.

The credit utilization factor in your credit score is typically updated frequently, so decreasing it can have a quick impact, even within 30 to 60 days.

3. Apply for a Secured Credit Card

This is a credit card that is backed by a cash deposit that you make, equal to the credit limit of the card. That cash acts as a security deposit and stays with the lender for as long as you have the card. You use the card like any other credit card, and pay the balance when it’s due.

The difference is that, if you don’t make your payment, the lender has your deposit to protect their interest. But if they have to dip into the deposit, your credit rating will suffer. A secured card is a temporary measure — once you’ve built up your credit, you’ll be able to qualify for an unsecured card.

If you use the secured card responsibly — meaning you make your payments on time — you can improve your credit score in as little as six months, though it could take over a year, depending on how you use it.

Building better credit without a credit card of any kind is futile. Apply for a secured card with a low limit — and just apply for one. Lenders will pay attention to the number of accounts you apply for. If you get the card, you’re off to a good start.

Look for a secured card that offers the option to upgrade to an unsecured card once you’ve improved your credit, so you can eventually take advantage of the perks most unsecured cards offer. If possible, you want to avoid closing any credit card, as that can decrease your credit score.

4. Request a Credit Card Limit Increase

You can call the creditor to increase your limit. This will lower your credit utilization, provided that you do not add more debt.

However, it’s vital to understand that, in some cases, requesting an increase can trigger a hard inquiry to your credit, which will temporarily decrease your credit score. Make sure you know if your creditor performs a hard inquiry before you request a credit limit increase — a soft inquiry won’t impact your score.

To avoid a hard inquiry, you can also decrease your credit utilization by paying down your balances.

5. Diversify Your Credit Types

Credit bureaus evaluate the types of accounts you manage and like to see a good mix. Maintaining a variety of loans, such as credit cards, auto loans, personal loans and mortgages, demonstrates your ability to handle multiple types of credit responsibly.

Know, however, that opening too many accounts at once can have a negative impact on your credit score, especially if they require hard credit inquiries. Consider looking for offers that offer preapproval — which only require soft inquiries — and only apply for accounts you’re preapproved for, to reduce the number of hard inquiries on your credit report.

6. Use Credit Builder Loans

This is like a secured credit card: You put down a deposit equal to the amount of the loan, then pay the loan according to its terms. Once the loan is paid off, you get your deposit back, plus — hopefully — a shiny new credit score.

Banks and credit unions, like BMO, DCU and Patelco, and services like Credit Karma, Credit Strong and MoneyLion are good places to look for a credit builder loan. Compare the terms and make sure you can meet the repayment requirements before you apply.

If you’re wary of taking on a loan, you might want to consider services like Experian Boost instead — this and similar services allow you to report payments that might not otherwise appear on your credit report, like utilities, rent and insurance. Reporting those on-time payments can boost your credit score.

7. Monitor Your Progress

You should check your credit report regularly to find out if there is inaccurate information. You can access your credit report through all three major credit bureaus: Experian, TransUnion and Equifax. You can also access all three through services like CreditReport.com. 

As you look through your credit report, it is a good idea to check for the following common mistakes:

• Incorrect personal information. Check if your name, Social Security number and address are correct. 
• Accounts listed in error. Find out if there are accounts listed that you never opened or loans inaccurately listed in your name. 
• Payment mistakes. Find out if payments made on time were listed late. 
• Check for duplicate accounts. Look for duplicate accounts, which can skew your credit history. 
• Closed accounts that are still open. Inaccurate information can have a negative impact on your credit score. 

Reviewing this information and requesting that negative entries be removed may help your credit score.

It’s also a good idea to sign up for a credit monitoring tool that will alert you to any significant changes to your score. Some banks offer this service for free if you have an account or credit card with them. The credit bureaus and other services have similar tools, though you may have to pay.

Mistakes To Avoid When Building Credit

When building your credit, you should steer clear of common pitfalls. These are some of the key missteps to avoid along the way.

• Missing payments. Even missing one payment can hurt your credit score. Set reminders on your phone or enroll in automatic payments to avoid missing a payment. 
• Carrying a high balance. Maxing out your credit card lowers the balance you can access. A balance that reaches the high end of your credit limit decreases your credit score. 
• Opening too many credit cards. If you open too many credit cards at once, the number of inquiries lowers your credit score. 
• Closing your accounts. Closing your accounts can shorten your credit history length, increase your credit utilization and lower your credit score. 
• Ignoring your credit report. It’s a good idea to check your credit report regularly. Errors can lower your credit score. 
• Co-signing carelessly. If the co-signer fails to pay, you’re still responsible for the debt. If you don’t pay, it likely will lower your credit score. 

Final Take: Stay Committed to the Process

Building and maintaining a strong credit profile takes time, patience and consistency. Diversifying your credit accounts is just one piece of the puzzle — staying committed to responsible habits like making on-time payments, keeping balances low and monitoring your credit regularly is essential.

Remember, the journey to excellent credit is a marathon, not a sprint, so stay focused and avoid unnecessary debt. Your commitment today will lay the foundation for long-term financial health and success.

Karen Doyle and Caitlyn Moorhead contributed to the reporting for this article.