Although it can take some time to build up a good credit history, you can speed up this process by getting into good credit building habits. The fastest way to build credit is by paying your bills on time, using credit responsibly, and keeping your balance low.
When looking to build or improve your credit history, there are lots of small steps you can take to improve your credit. Try to use methods that suit your situation.
- Obtain a credit cardUsing a credit card can help you build up your credit history as they will report your account to the main credit reference agencies.
If you don’t have a lot of history, try to get a secured credit card. These usually require a refundable security deposit to help determine your credit limit.
Try to only use your card for small planned expenses like food or fuel and pay them on time.
For example, if you have $50 allocated in your monthly budget for food, you can use your credit card to pay for this and fully pay off your statement.
You don’t need to leave a balance or pay any interest.
- Always pay your bills on timeMany credit scoring systems will take your payment history into consideration. If you miss just one payment, you could hit issues depending on what account you have.
To avoid missing your payments:
- Set up automatic payments to pay at least the minimum amount due.
- Create reminders on your calendar.
- Ensure you have enough money in your account.
- Contact your lender as soon as possible if you think you may miss a payment.
It is generally better to fully pay off your statement.
- Keep your credit utilization lowThis refers to how much of your credit you’re using.
If you have a credit limit of $1,000 and your balance is $200, your credit utilization will be 20%.
Keeping this low can help build a healthier credit profile. A common recommendation is to keep this below 30%; however, many scoring systems will prefer this to be lower.
You can reduce your credit utilization by paying down your balances, not spending unnecessarily, and paying an extra payment before your statement ends.
Lenders and credit scoring systems may calculate your reported balances differently.
- Get added as an authorized userIf you know someone you trust who has a well-managed credit card, ask if they can add you as an authorized user.
Depending on how they report and the credit scoring model, this may help your credit profile.
However, before agreeing, ensure the main cardholder has a good payment history and low balances.
- Take out a credit builder loanA credit builder loan will help you build up your payment history. Depending on the product, you will make payments into a secured account. The lender will report any eligible activity to the credit reference agencies.
Before taking this out, ensure:
- They report to the relevant credit reference agencies.
- What the interest rate and administration fee is.
- How long you will be repaying.
- That the monthly payment fits into your budget.
Don’t take out a loan just to boost your credit if you can’t afford the payments comfortably.
- Check for mistakes on your credit reportsIf there are mistakes on your accounts, unknown accounts, or inaccuracies with late payments, this can affect your credit profile.
Check your credit reports with the correct credit reference agencies within your country. If there are any mistakes, follow their process to dispute this and provide evidence.
This will help ensure any true mistakes are corrected.
- Don’t make these common mistakesThe fastest way to build credit isn’t to open as many accounts as you can. Opening multiple accounts can cause you to have multiple hard searches, and having a few new accounts can make your finances harder to manage.
Don’t:
- Open multiple cards in a short space of time.
- Miss payments or pay late.
- Have maxed out credit cards.
- Close any accounts.
- Pay companies that promise you guaranteed instant improvements to your credit score.
There is no genuine way to boost your credit instantly.
How quickly can I build my credit?
Depending on your current credit history, what accounts you open, and what credit scoring system the lenders are using, it can take several months to build up an initial credit history. However, it can take longer to see real improvements.
If you have no credit history to begin with, focus on building up regular payment histories. If you have credit issues already, focus on paying your bills on time, reducing your balances, and fixing any mistakes.
Overall, the fastest way to build credit is by using credit responsibly, paying on time, keeping your balances low, and regularly checking your credit reports. It is important to be consistent with your credit building, and the best method for you will be something you can stick to without getting into unnecessary debt.
