Building up a credit score isn’t hard! At least, it shouldn’t be hard.
With how confusing credit scores and banking is, to begin with, people can find that building up their credit score is difficult.
Some people don’t even think about their credit score at all, and never bother to check it. Still, never checking their score does hurt it in the long run.
However, here is a list of 7 easy ways to build credit fast for people building their credit from scratch or trying to recover from bad credit.
1. Look out for Errors
Every year, people are allowed one free credit report.
People need to use that free credit report to comb their credit history for any discrepancies they know for a fact are false.
One such error that might pop up is payments marked as late when they were paid on time.
When one does spot an error, they need to make sure they make a dispute and report that error. Reports can be made through companies such as Equifax, TransUnion, and Experian.
Once a dispute is reported, it should only take about 30 business days for the error to be corrected. Afterward, the credit score will already begin to reflect the corrected information.
2. Authorized Users
Another way to build credit fast is to become an authorized user on someone else’s account. Usually, this will mean becoming an authorized user on a friend or family member’s credit card.
Authorized users will be able to use the credit card and build their credit history. However, authorized users are also not legally obligated to pay for any charges on that account either.
If someone does become an authorized user, they should have a sit down chat with the individual that owns the account and discuss how the card should be used. They may also want to talk about sharing payments.
If someone isn’t able to become an authorized user, then they should see if they can get a cosigner instead.
People who were previously denied for loans or unsecured credit cards are often approved if they have a cosigner.
Cosigners are responsible for the full amount of the loan or payments on the credit card if the primary owner doesn’t pay.
3. Apply for a Credit Card
The standard way to build credit fast is the open a credit card account. It may even be a good idea to open a second account too despite what myths may say.
However, it’s better to keep the number of credit card accounts to 3 or less.
Most people just need to make sure that they are using their credit cards responsibly and paying their bills on time.
Another alternative is to increase the limit on their credit card. If the credit card maxes out at $1,000, then it’ll be helpful to increase the limit to $2,000 or so.
However, not all credit card issuers will accept that idea, especially if the cardholder has bad credit or appears to spend too much.
In that case, getting the second card from a different bank is the most beneficial option.
Of course, the second card can be a secured credit card instead of an unsecured credit card. Secured credit cards require a deposit, which is usually how much the card limit is set for too.
People just need to make sure that the secured credit card has an annual fee they can accept in addition to everything else they pay, and that it reports to Equifax, Experian, and TransUnion.
4. Keep the Charges Low
According to FICO, the most efficient way to use a credit card is to keep the usage to less than 30%.
The more people use their credit cards, the more money they owe. For someone with a $1,000 max, if they charge a $500 sofa to their card, then they’ll have a 50% usage rate.
As mentioned earlier, a good idea to build credit fast is to increase the limit of the card, especially for people who know they charge close to the current max limit of their card.
It helps to make multiple smaller payments a month to keep the balance on the cards down.
5. Don’t Cancel Cards
While canceling a credit card may seem beneficial, it actually makes a person’s credit drop.
People need to try to keep their accounts open for as long as possible. However, if the main reason to cancel a card is that it’s not being used, then try using it for a recurring charge.
Recurring charges such as monthly bills or subscriptions are a good way to keep otherwise unused cards and to keep up the payment history for that card too.
Payment history is another factor that affects a credit score.
However, if someone does end up canceling their card, they need to know that the account will still be visible on any reports.
6. Credit Variety
As a warning, while this method will help people build credit fast, it should only be undertaken by those who know that they can afford it.
Having a variety of credits on one’s credit history not only looks good, but it also improves the credit score as well.
The different types of credits include student loans, mortgage loans, furniture purchases, credit cards (especially cards from more than one bank), and retail credit cards.
Another loan that some consider is a credit-builder loan, which does exactly as it says.
7. Pay Bills on Time
While this tip may seem the easiest, some people do find it hard to manage.
Still, one of the best ways to build credit fast is to make sure that all bills are paid on time.
As it was mentioned earlier, payment history (and thus paying bills) amounts to 35% of a person’s credit score.
So for people who can never remember to pay their bills on time, it’ll be extremely beneficial to set up an automatic payment for their most important bills.
Of course, another recommendation is to deal with bills that are past-due.
One way to deal with these past-due bills is to negotiate with the creditor.
It is highly suggested for people to write to their creditors offering to pay the remaining balance so long as the creditor goes on to report the balance as paid.
Another tip is to pay current bills twice a month instead of just once a month.
Creditors only report the balance of an account once a month, and credit bureaus will see just that one report.
For people who spend a lot of money each month and only make payments once a month, the credit bureaus will see that high expenditure.
Payments twice a month will lower the balance of an account, so when the creditors report it that month, it won’t look as bad.
Build Credit and Save
With these credit building techniques, no one has to be afraid of going out and buying that new car they’ve been eyeing for a while.
Of course, while building up credit is amazing, it’s also a great idea to save money as much as possible. Especially, when making a down payment for that car.
Don’t forget to check back for more financial help on how to build credit!