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Most people decide to improve their credit score when they’re preparing to apply for credit or if they’ve struggled to qualify for a credit card, loan or lease. In these instances, you want to build your credit as quickly as possible. While there’s no magic fix for poor credit, the solutions can be simple.
Use these seven strategies to quickly build a rock-solid credit score.
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1. Pay All Your Bills On Time
On-time payment history is the most important factor when building credit. Your payment history, which is one factor that makes up your FICO score, accounts for 35% of your FICO credit score. This means you should always aim to pay your bills on or before the due date.
Setting up automatic payments is the easiest way to pay bills on time. You’ll connect your bank account to the provider, who will automatically charge your account on or before the due date. Creating automatic payments means you won’t have to worry about missing a payment, as long as you have enough money in your bank account to cover the bill.
If you choose to not use autopay and realize you’ve missed a payment, contact the lender or bill provider and rectify it as soon as possible. Only late payments over 30 days are reported to the credit bureaus. The later the payment, the more it will impact your score.
2. Get a Secured Credit Card
A secured credit card is designed to help borrowers build their credit.
When you sign up for a secured card, the provider will require a cash deposit to serve as collateral and act as the credit limit. For example, if you put down $200, you’ll have a $200 credit limit. If you don’t pay your credit card bill, the card company can take the deposit.
You can use a secured card at the same in-store and online retailers where you would use a traditional credit card. However, your credit limit will typically be lower.
With a smaller limit, you should only use a secured card for small purchases well below your credit limit. This is because your credit utilization ratio, which represents how much of your total available credit you use in a given time, is the second most important credit factor. For example, if your current balance is $100 and your credit limit is $200, then your utilization ratio is 50% ($100/$200).
As a rule of thumb, it’s best to keep your credit utilization ratio below 30%. However, a ratio below 10% will result in an even better score. So if you open a secured credit card, multiply your total limit by 30% and never go above that at a given time. For example, if your limit is $200, don’t use more than $60 at a time ($200 x 30%).
3. Become an Authorized User
An authorized user is someone who is added to an existing credit card account. Authorized users can use the card but will not be responsible for any payments. When you become an authorized user, the card’s history will appear on your credit report. If the main cardholder has made on-time payments, then your credit score may receive a boost.
4. Pay Off Any Existing Debt
To reduce your credit utilization ratio quickly and improve your score, use the debt avalanche or debt snowball method to pay down existing debt:
- With the debt avalanche method, you focus on paying off your highest-interest debt first, followed by the debt with the next highest interest rate, and so on. However, be sure to make the minimum payments on any other cards in the process to avoid any penalties.
- The debt snowball method, on the other hand, focuses on paying off your smallest balances first while still meeting the minimum payment requirements for your other cards. This method is meant to help build momentum as you get a sense of achievement from paying off one card after another.
5. Apply for a Credit-builder Loan
A credit builder loan is geared toward borrowers with no credit history who don’t want to open a credit card.
To use a credit builder loan, you first decide on the amount and term. Instead of receiving the money upfront, every month you make a payment to the lender, and they report it to the credit bureaus. When the term is completed, you receive back the amount you paid, minus possible fees.
If you made payments on time, you should have improved your payment history and therefore boosted your score.
6. Request a Credit Limit Increase
Paying down your debt is not the only way to decrease your credit utilization ratio. Another strategy is to increase the credit limit on your credit cards while keeping your balance at or below the same amount.
To request a credit limit increase, contact your card provider. It may run a credit check before approving the limit, which can ding your score by up to five points. Remember to not get greedy with a larger credit limit. If you decide to overuse your new limit, you’ll defeat the purpose of this strategy.
7. Consider Experian Boost or UltraFICO
When you have no credit history, adding extra accounts can boost your score. You have two options that could help you: Experian Boost and UltraFICO:
- Experian Boost evaluates your utility, streaming and other accounts and adds on-time payments from these accounts to your Experian credit report. If a lender or card company uses another credit bureau, they won’t see any of your Experian Boost accounts.
- UltraFICO is a program from FICO that adds information about your bank account balances, cash flow and bank transactions. However, not every lender uses or accepts the UltraFICO score.
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Frequently Asked Questions (FAQs)
How do I get my credit score up 100 points in one month?
Increasing your credit score by 100 points in a single month is almost impossible, especially if you’re starting from nothing. However, if you have a significant mistake on your credit report, like a default that never happened or a credit card that doesn’t belong to you, removing it can boost your score significantly.
How long does it take to build a 700 credit score?
It can take several months to increase your credit score, and even longer if you have bankruptcies, defaults, late payments or liens on your report. The exact time frame to build a 700 credit score depends on the person.
What is the quickest way to build your credit?
The fastest way to build a credit score from scratch is to open a credit card, maintain a credit utilization ratio below 10% and pay it off every month.
If you already have a credit card, aim for a credit utilization below 10% and never miss a payment. If you have a loan, like an auto loan or student loan, make payments on time and avoid opening new loans. It will still take several months to build your credit, so follow the steps above and be patient.
Now, I'm no stranger to the world of credit building, and I can certainly give you the lowdown on the strategies outlined in that Forbes article. Paying bills on time is the cardinal rule—it contributes a whopping 35% to your FICO score. Automatic payments can be your trusty sidekick, preventing any slip-ups.
Secured credit cards are like training wheels for credit. You throw down a cash deposit, and that becomes your credit limit. It's a safe way to dip your toes into the credit pool. Remember, keeping your credit utilization below 30% is key—small purchases and timely payments are your allies here.
Becoming an authorized user is like riding the coattails of someone with good credit. Their responsible credit behavior rubs off on you, boosting your own score. Clearing existing debt is a no-brainer. The debt avalanche or snowball methods can be your guide, depending on your style.
Credit-builder loans are another tool in the kit. You pay a set amount each month, and it gets reported to the credit bureaus. Think of it as a slow and steady race to better credit. Requesting a credit limit increase can be a savvy move, but don't let the power get to your head—stay responsible.
Now, Experian Boost and UltraFICO are like secret weapons. Experian Boost gives you credit for bills you're already paying, while UltraFICO brings your banking habits into the credit score equation. Just remember, not all lenders are hip to UltraFICO.
And for those looking to fast-track credit building, opening a credit card and maintaining a low credit utilization (aim for below 10%) is the express lane. Patience is a virtue in the credit game, but with these strategies, you'll be on the road to a rock-solid score.
