5 Strategies to Build Credit Fast

Lamine Zarrad
February 15, 2022
3 mins

There are lots of reasons to build credit. Maybe you want to qualify for an auto loan or mortgage. Maybe you’re tired of paying high utility deposits and interest rates. Maybe you’re a budding entrepreneur hoping for a business loan.

No matter what your “why” is, having good credit creates a firm foundation for your financial future. 

Five strategies to build credit fast: 

1. Reduce your debt or increase your credit limits

Your credit usage ratio accounts for 30% of your credit score

Your credit score, also called a FICO score, is a three-digit number between 300 and 850 that tells lenders how likely you are to repay a loan. The three major credit bureaus (Experian, Equifax and TransUnion) use a specific set of criteria to determine your credit score. 

One of the most influential factors of your credit score is called credit usage, also referred to as credit utilization or debt-to-credit ratio. Your credit usage is calculated by tallying up how much debt you owe vs. how much credit is available to you to borrow.

While auto loans and student loans do count toward your total debt, credit usage focuses on a category called revolving debt. Revolving debt is a line of credit, usually a credit card, that you can use and pay over and over with a varying monthly payment amount. 

Auto loans, mortgages, and student loans are called installment debt. Paying down your installment debt WILL boost your score, but it will not affect your credit utilization.

To boost your credit, you should aim for a credit usage percentage below 30%. For example, if you have one credit card with a $1000 limit, keeping the balance below $300 will have positive effects on your FICO score. 

Improving your credit usage to boost your score can be done in two ways: 

  • Pay down your revolving debts, beginning with the debts that carry the highest interest rates. Remember that, while paying down installment debts like auto loans and student loans is helpful, it will not impact your credit usage percentage. If you have multiple lines of credit, find your interest rate, also called APR, by checking your online account or calling your credit card company. The card with the highest interest rate should be your primary focus, but you should continue to make monthly payments on time for any other loans and lines of credit.
  • Increase your available credit by asking your credit card provider to raise your credit limit. The provider will assess your current credit status to make this decision, and they may request additional information on your income level.Use this method cautiously, as it carries the risk of pushing you further into debt. If you find yourself lacking willpower when it comes to swiping that card, or if you don’t have any savings to protect your budget from emergencies, the temptation to use up your newly available credit may do more harm than good.

Another way to increase your available credit is by opening a new credit card. Like requesting a credit limit increase, a new card could become a tempting new source of debt. 

An additional caveat is that new lines of credit lower your overall “credit age,” which is the average length of time that you’ve had each credit account. A higher credit age shows more stability, which raises your credit score. 

Improving your credit usage percentage is one of the fastest ways to raise your credit score. You’ll see a score increase as soon as your credit card providers report your new balance or limits to the credit bureaus. 

2. Make your payments on time

Payment history accounts for 35% of your credit score

Yes, it takes time to build good credit with timely payments. But in the short-term, late payments will cause your score to dip as soon as they’re reported to the bureaus. These late payments can stay on your credit report for 7 years, and it can be difficult to correct their impact on your score.

There are many reasons that someone might be late on a credit card or loan payment. Financial hardships from employment gaps or medical emergencies can throw even the best budget off track. Sometimes, human error is to blame (hey, nobody’s perfect). 

If you do find yourself falling behind, communication is key. Especially post-pandemic, many creditors have options in place to help borrowers get on track after periods of delayed payments. Call your credit card provider and ask if they’re willing to consider removing a delinquent payment from your credit report once you’re caught up.

3. Deal with credit report errors

Check your credit report carefully for errors and fraudulent information

Each of the three major bureaus is legally obligated to provide a free copy of your credit report to you annually. Contact Experian, Equifax, and TransUnion to request a copy. Then, carefully scrutinize each report for inconsistencies. 

Your credit report could contain loans you haven’t taken out, credit inquiries you never agreed to, or connections to addresses you’ve never lived in. These discrepancies could be due to a mixup, or they could be signs of a serious identity theft situation.

If you find errors on your credit report, you’ll need to dispute them. Begin by sending a letter to the affected credit bureaus explaining the inaccuracy. Include a copy of the credit report that shows the item of concern. The bureau is required to investigate and respond within 35 days.

4. Get a secured credit card

Most secured credit cards have low spending limits and are backed by a cash deposit

Most of these strategies focus on improving your existing credit. But what are the options for someone who is starting out with no credit history? 

One way to build credit is by using a secured credit card. A secured card is a credit card that is backed by a cash deposit that the lender holds onto to offset the risk of making a loan to a person without a credit history. Usually, this deposit is equal to your credit limit on the secured card. 

A secured card has pros and cons. On the positive side, it is a way to begin building your credit history without a risk of going too far into debt. However, these cards usually carry high interest rates despite being secured by your own cash. 

Additionally, secured cards carry low balances. That means that you can’t spend much without the risk of increasing your credit usage (and decreasing your FICO score).

5. Take advantage of new credit building tools

Try a service that reports bills like rent and utilities to the credit bureaus

It seems absurd that you can pay rent, utilities and more on time every month and still struggle to build credit. StellarFi agrees. 

With no credit check and no interest charges, Stellar enables you to build credit with the bills you already pay. And, you can build credit without a secured credit card or high-interest loan.

Here’s how it works: 

  1. You sign up and link your bank account. 
  2. StellarFi makes sure your bills are paid on time
  3. We report your positive payment history to the major credit bureaus (Experian, TransUnion and Equifax), so they know what a responsible credit holder you are.

What happens next is up to you. What will you do with that “stellar” credit score?

Topics:
No items found.

The StellarFi blog is intended to serve as an informational resource. While StellarFi can help you build your credit, we do not provide financial, legal, or accounting advice. Please consult a trusted advisor for financial, legal, or accounting guidance as needed.

Related Articles

Cosigning a Loan or Adding an Authorized User? Read This First.

Are you considering cosigning a loan or adding an authorized user? This article unpacks the potential risks and benefits of sharing credit.

Cosigning a Loan or Adding an Authorized User? Read This First.

Are you considering cosigning a loan or adding an authorized user? This article unpacks the potential risks and benefits of sharing credit.

Cosigning a Loan or Adding an Authorized User? Read This First.

Are you considering cosigning a loan or adding an authorized user? This article unpacks the potential risks and benefits of sharing credit.

Cosigning a Loan or Adding an Authorized User? Read This First.

Are you considering cosigning a loan or adding an authorized user? This article unpacks the potential risks and benefits of sharing credit.

5 Strategies to Build Credit Fast

What can you do to build credit quickly? There are several strategies and tools you can use to establish new credit, or improve your credit score. Take a look at the top 5 ways to build credit fast.
Building Credit
3 minute read

How Young People Can Build Credit

When it comes to building credit, the best time to start is now! Here's how young people can build credit, what to do if you have NO credit, why it's important to build your credit, and more.

6 Mistakes People Make When Paying Down Debt

Paying down debt is a great way to boost your credit score and reduce costly interest payments. Try to avoid these common errors to make the process easier and faster.

How to Build Credit Fast (Even if You Have None)

Learning how to build credit fast can be confusing and overwhelming. Check out our helpful guide complete with explanations, tips, and tools to help you build credit, even if you have no credit score.

How Do Student Loans Affect Your Credit Score?

How do student loans affect your credit score? This resource takes a closer look at how student loans can help - or hurt - your credit history.

7 Consequences of Having a Low Credit Score

Meta: The consequences of having a low credit score are bigger than you may think. Here are seven ways a spotty history can cause friction in your daily life.

Why Am I Not Being Approved For A Credit Card?

Why am I not being approved for a credit card? If you’ve found yourself asking this question, one of these nine common credit denial reasons may be to blame.

How Long Does it Take to Build Credit from Nothing?

Are you one of the 16% of Americans without a credit score? Here's how long it usually takes to establish your credit, plus some tips to speed up the process.

What is the Lowest Credit Score You Can Have?

Many know that the highest credit you can earn is 850. But what is the LOWEST credit score you can have? This one might surprise you! Check it out.
JOIN STELLARFI

Be the first to try StellarFi

Join the StellarFi waitlist today. If you already opted in to our beta program, head to our beta page.

Made with 🧠 + ❤️ + 🤖 in Austin, Texas

Say Hello

© 2022 StellarFinance, Inc. All right reserved.