Credit Sesame advises that learning how to build credit fast helps to potentially improve your chances of getting approved for financing, such as a loan or credit card. Plus, the better your credit score, the more competitive interest rate you’ll receive. That means you’ll end up paying less to borrow money. Discover nine strategies that can quickly impact your credit, as well as how to maintain your score once it starts to increase.
Strategies to quickly improve your credit
- Check your credit report and dispute mistakes. Start with a clean credit slate by making sure there’s not inaccurate information bringing down your score. Get free copies of your Equifax, Experian, and TransUnion credit reports via AnnualCreditReport.com. If you see any errors, file an online dispute with the credit bureau. Disputes must be resolved within 30 days, so this can have a fairly quick impact on your score.
- Pay your bills on time. Paying your bills on time is financially healthy for a number of reasons, including avoiding late fees. But additionally staying on top of your debt payments (like loans, credit cards, and lines of credit) also ensures you don’t rack up negative entries on your credit report, which are reported at 30-day intervals.
- Deal with collections accounts. Your credit score will suffer if those late payments enter “delinquent” territory and go to collections. Prioritize these obligations over other financial goals, while making sure to make at least minimum payments on all of your accounts. Try to negotiate with the collection agency to have the collection status removed from your credit report once it’s paid off. Just be sure to get any agreement in writing.
- Make multiple credit card payments each month. This is a good trick when you know your credit report and score will be pulled in the near future. Instead of making one large payment on your credit card, make two or more payments throughout the month instead. Your credit score reflects a moment in time and is constantly changing. If you pay off half your balance at the beginning of the month, you’ll automatically lower your credit utilization compared to waiting for your payment due date.
- Request a higher credit limit. This is a low-effort strategy that can quickly improve your credit score. Contact your credit card company and ask for a higher credit limit. Your credit utilization refers to the amount of your available credit line that has a balance. So if your credit limit is $10,000 and you have a balance of $5,000, your credit utilization is 50%. By asking for a credit limit increase (for example, up to $15,000), you’ll lower your credit utilization ratio. In this instance, it would drop to 30%.
- Ask to become an authorized user. If you have a parent, relative, or friend with a good credit score, you can ask to become an authorized user on one of their credit cards. That account is then added to your own credit report and can also increase your overall credit limit. You don’t have to get access to the account if they don’t want you to. Just know that any balances they carry or late payments will equally impact your credit.
- Enroll in credit reporting for rent and utility payments. Not all credit score models accept rent and utility payments, but having those payments on your credit report can still help your financing applications. Your landlord may already offer a rent reporting service. You can also enroll in an independent program that verifies both rent and utilities payments on your behalf.
- Get different types of credit. Different types of credit impact your score differently. Having multiple types of accounts can actually improve your score; this is called your credit mix. If all of your debt is associated with revolving credit like credit cards and lines of credit, your score may hurt a bit. But if you mix it up with installment loans (like auto loans, student loans, or a mortgage), you’ll have a more diverse credit mix.
How your credit score is calculated
When considering how to build credit fast, think about the factors that specifically influence your credit score (and how much). This helps you prioritize which steps to take first to ensure maximum impact.
- Payment history (35%): Your payment history accounts for more than a third of your total credit score, which is why it’s so important to make your payments on time. Find a method that works best for you, whether it’s setting up automated bill pay or creating calendar reminders for your due dates.
- Credit utilization (30%): Your credit utilization is essentially how much debt you have compared to the amount of credit that is available to you. Ideally, you’ll want to keep your credit card balances below 30% of your credit limit. So if your credit card limit is $10,000, try to keep your outstanding balance below $3,000 (or ask your credit card company to increase your credit line).
- Length of credit history (15%): The longer you have an established credit history, the better your score will be. This portion of your score factors in three different things: your oldest credit account, your newest one, plus the average of all your accounts. That’s why it’s good to keep credit cards open, even if you don’t use them (unless, of course, there’s an annual fee).
- Credit mix (10%): Credit mix refers to the types of credit accounts you have. It includes things like credit cards, student loans, auto loans, mortgages, personal loans, home equity lines of credit, and more. You should never take out unnecessary credit just to change your credit mix. But if you need financing, think about all the options you have available; for instance, in some cases a personal installment loan may be better than a credit card, both in terms of credit mix and interest rates.
- New credit (10%): Your credit score is also impacted by how much new credit you apply for and receive. New inquiries stay on your report for two years and typically lower your score by a few points for one year. You may also see a minor dip when you open a new credit card or loan account. It is important to keep this in mind when thinking about how to build credit fast.
How to build credit fast without credit accounts
It can be hard to get approved for a credit card if you don’t have a solid credit history already in place. Whether you’re starting from scratch or trying to improve a previously damaged score, a secured credit card can help establish a positive payment history. You must make a cash deposit, then you can use the credit card and make on-time payments to improve your credit. You’ll receive your deposit back once you’re ready to graduate to an unsecured card.
Improve your credit score fast with Sesame Cash’s Credit Builder
You can avoid secured credit cards and other restrictive products and still build your credit score using the Sesame Cash Credit Builder. There’s no fee or credit check because it acts as a debit account rather than a credit card. Your security deposit is used to fund a line of credit. Then Credit Sesame does all the work in identifying purchases that match your utilization limit, creating and paying off a balance, and reporting those on-time payments to the credit bureaus. It is truly how to build credit fast, made easy.