For most persons, the decision to improve their credit score usually comes when they’re preparing to apply for credit or when 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.
Yes, improving your credit score takes time, but there are things you can take right now to see immediate results.
Here are some quick ways to improve your credit score. They aren’t all easy, but the return is well worth the effort.
Table of contents
- What Is A Credit Score?
- Why Do I Need A Good Credit Score?
- How Long Does It Take To Improve Your Credit Score?
- Why Does It Take So Long To Build Good Credit?
- How to Build Your Credit Scores
- How To Keep Your Credit Score High
- 6. Keep an eye on your credit report
- FAQs On How To Build Credit Fast
- We Also Recommend
What Is A Credit Score?
A credit score is a three-digit figure that ranges from 300 to 850 in general. Your credit score is based on information in your credit reports, such as your payment history, the amount of debt you owe, and the length of time you’ve had credit.
There are numerous different credit scoring algorithms, and some of them use data from other sources to calculate credit ratings.
Potential lenders and creditors, such as banks, credit card companies, and car dealerships, consider credit scores as one aspect in evaluating whether or not to provide your credit, such as a loan or credit card. It’s one of many factors they use to estimate how likely you are to repay money you’ve borrowed.
It’s vital to note that everyone’s financial and credit status is unique, and there is no “magic number” that would ensure better loan rates and terms.
Why Do I Need A Good Credit Score?
Before you qualify for a new credit card, credit card issuers, like other lenders, will look at your credit score to gauge the risk of doing business with you.
If you want to apply for a premium travel rewards credit card, you’ll likely need good, if not great, credit. A decent credit score may be enough to get approved for various sorts of credit cards, including ones with 0% introductory APR rates.
Your credit score can have a big impact on the APR and other terms of your account, even if you don’t qualify for a credit card. Credit card issuers utilize credit scores not just to help them decide whether or not to approve applications, but also to establish the pricing on the cards they approve.
READ ALSO: 15 Best Credit Cards For Beginners In 2022
How Long Does It Take To Improve Your Credit Score?
To start rebuilding your credit score, you must first use credit, such as by getting and using a credit card or repaying a loan.
To develop enough credit history for a FICO credit score, which is used in 90% of loan decisions, it will require around six months of credit activity. FICO credit ratings range from 300 to 850, with a score of 700 or more being considered acceptable. A score of 800 or more is considered exceptional.
Don’t hold your breath for a big number immediately now. While you can build up enough credit history to generate a score in less than a year, getting a good or exceptional credit score takes years of responsible credit usage.
See Also: How To Apply For A Business Loan
Why Does It Take So Long To Build Good Credit?
When you’re just getting started with your credit score, time isn’t on your side. Lenders want to see consistent positive behavior, which is a big factor in FICO scores:
- Payment history (35 percent of score): Have you routinely made on-time payments?
- Amounts owing (30% of total score): How much debt do you have compared to the amount of credit you have available?
- Credit history length (15 percent of score): How long have your accounts been open on average?
- Have you opened multiple new credit accounts in a short period of time? This accounts for 10% of your score.
- Credit mx (10%): Do you have any expertise managing various sorts of credit and loans?
In the eyes of lenders, proof that you pay your bills on time and don’t have high credit card balances makes you a less hazardous and more trustworthy credit user.
Those responsible habits are also more credible when exhibited over time, which is why establishing a solid credit score from the ground up takes time.
How to Build Your Credit Scores
The particular activities you can take to increase your credit score will be determined by your personal credit status. However, there are certain general steps that practically anyone may take to improve their credit.
1. Establish a credit history
The first stage in growing your credit file is to open new accounts that will be reported to the major credit bureaus—most major lenders and card issuers report to all three.
You can’t begin building a strong credit history until you have accounts in your name, so having at least a few open and active credit accounts can help.
If you’re just starting out or have a low credit score, these could include credit-builder loans or secured cards—or a wonderful rewards credit card with no annual charge if you already have a solid score.
Adding yourself as an authorized user on another person’s credit card can also help, as long as they use the card responsibly.
You can also sign up for Experian Boost to have positive utility, cellphone, and streaming service payments added to your credit report. These on-time payments wouldn’t be posted to your credit report ordinarily, but by using Boost, they’ll be included in your Experian credit scores.
READ ALSO: 17 Best Credit Cards for Fair Credit in 2022
2. Reduce your credit card debt
The ratio of your balances to your credit limits is referred to as credit usage. It’s the difference between the amount you owe on revolving debt (like a credit card) and the credit limit you have available.
Your credit usage ratio should be less than 30% overall. If your ratio is higher than that, you should aim to lower it in order to improve your credit.
3. Extend your credit line
If you can’t get your balance low enough to achieve a credit utilization ratio of 30%, you can enhance your credit use by increasing your credit limit.
After all, your credit limit is half of the credit use percentage. You can raise your credit limits by calling your credit card company and requesting a credit limit increase.
You can even request a credit limit increase online with some credit cards. If the lender authorizes your credit limit increase, you will usually know shortly after you apply.
It’s critical, though, to maintain your current spending habits and refrain from using the new credit. Any credit usage ratio benefits are nullified if you increase your expenditure in tandem with your available credit limit.
4. Make Sure You Don’t Miss Any Payments
One of the most essential criteria in determining your credit ratings is your payment history, and having a long track record of on-time payments will help you attain good credit scores.
To do so, make sure you don’t go more than 29 days without making a loan or credit card payment—payments that are more than 30 days late might be reported to the credit bureaus, lowering your credit score.
Setting up automatic payments for the minimal amount required will assist you to avoid skipping a payment.
If you’re experiencing problems paying a debt, contact your credit card company as soon as possible to discuss hardship options.
It’s also vital to keep track of accounts that don’t show up on your credit reports. Even if you make on-time payments, the account being sent to collections may cause your credit ratings to drop.
5. Pay Off Past Due Accounts
Bringing your bills current could help if you’re behind on them. While a late payment might stay on your credit report for up to seven years, keeping all of your accounts up to date will help you improve your credit scores.
It also prevents additional late payments from being recorded on your credit report, as well as late fees.
Talking to a credit counselor and enrolling in a debt management plan (DMP) could be a useful alternative for those struggling with credit card debt.
The counselor may be able to negotiate cheaper payments and interest rates with card issuers, as well as bring your accounts up to date.
SEE ALSO: 13 Best Store Credit Cards Of 2022
6. Pay down balances on revolving accounts
Even if you aren’t late on your payments, a high balance on revolving credit cards might result in a high credit utilization rate, which can lower your credit scores.
Maintaining a low balance on revolving accounts, such as credit cards and lines of credit, relative to their credit limitations can help you enhance your credit scores.
Credit utilization ratios in the low single digits are common among those with the best credit ratings.
7. Set a limit How Frequently Do You Make New Account Applications
While you may need to open accounts to enhance your credit score, you should try to keep your credit applications to a minimum.
Each application can result in a hard inquiry, which can lower your credit scores slightly, but inquiries can build up and have a compounding effect.
Opening a new account reduces the average age of existing accounts, which can lower your credit scores.
Although inquiries and the average age of your accounts are small score factors, you should nevertheless limit the number of applications you make.
Rate shopping for certain types of loans, such as an auto loan or a mortgage, is an exception. Rate shopping isn’t considered dangerous conduct by credit scoring models, so some inquiries may be ignored if they happen within a few weeks.
How To Keep Your Credit Score High
Positive improvements to your credit report information are all it takes to improve your credit score. It’s really easier to ruin your credit than it is to repair it, so here’s how to keep your credit in good shape once you’ve gotten started.
1. Buy only what you can afford
Credit cards are a tool, not an excuse, for overspending. If you’re using a credit card to develop credit, make minor expenditures that match your budget and pay the card off in full each month.
Because your credit usage ratio—the proportion of debt compared to available credit—is the second most important element affecting your credit score, regular use and full payment are critical.
2. Pay More Than the Minimum Due If You Have a Balance
The idea is to keep your credit usage ratio as low as possible, which means the more money you can pay each month, the better.
You’ll pay down your debt faster, lowering your credit utilization rate and improving your credit score, and you’ll save money on interest.
3. Keep track of your bills and pay them in time
Don’t let late payments disrupt your progress because your payment history has the greatest impact on your credit score.
4. Don’t apply for a lot of new credit cards at the same time
The issuing bank will verify your credit when you apply for a new credit card or loan, which is known as a hard inquiry. Your credit score will momentarily drop as a result of hard queries.
As time passes and more positive conduct is documented, it will bounce back. If you’re beginning from scratch, however, even a small drop of five to ten points can be substantial.
Furthermore, credit bureaus keep track of how frequently you apply for additional credit lines. Too many hard inquiries on your credit record can indicate that you are in dire need of credit, putting lenders at risk.
5. Don’t cancel any credit card accounts
When it comes to creating a credit score from the ground up, time is your best friend. Even if you have a card you don’t want or use in a year, keep the account active unless it has an annual fee.
Your FICO score is directly affected by the duration of your credit history, thus the longer your accounts have been open, the better your credit score.
6. Keep an eye on your credit report
Each of the three major credit agencies, Experian, Equifax, and TransUnion, is required to provide you with a free copy of your credit report once a year. To access a free report and familiarize yourself with it, go to AnnualCreditReport.com. Check for inaccuracies and symptoms of fraud, and report anything suspicious right once.
FAQs On How To Build Credit Fast
When it comes to reporting to credit bureaus, credit card firms have a lot of leeways, but they normally do so at least once a month. As a result, after a month, your credit card behaviors will begin to affect your credit score. However, it is possible that it will not have enough of an influence to affect your credit score; the magnitude of the impact will be determined by your previous credit history.
Your credit score will recover from a hard check in a few months if all other factors remain constant. Although the inquiry may be on your credit report for a little longer, the impact of a single hard inquiry on your credit score is minor and transient.
It can take many months to raise your credit score, and even longer if your credit report contains bankruptcies, defaults, late payments, or liens. The time it takes to reach a credit score of 700 varies depending on the individual.
You don’t start with any credit score, and you won’t get a score until you open a credit account that reports to the credit bureaus.
While starting out in the quest to build a credit score don’t expect a spectacular number right off the bat. While you can build up enough credit history in less than a year to generate a score, it takes years of smart credit use to get a good or excellent credit score.