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

Lamine Zarrad
March 7, 2022
15 mins

Healthy credit is important for a healthy financial life. Keep reading to learn how credit works, how to read a credit report, and how to build good credit fast – even if you’re just starting out.

Why is credit important – and what is it, anyway?

Whether it’s a first home or our daily cup of coffee, credit helps us access the things we need now – with the promise we’ll pay for them later. 

In today’s society, all roads lead back to credit. With good credit, we’re more likely to get approved for loans and credit cards, receive lower interest rates, and pay less for home and car insurance. 

Unfortunately, with poor or no credit, we can find ourselves locked out of life’s financial milestones. That’s why it’s important to understand how credit works, and how to use it wisely. 

It’s never too late to build a good credit score. If you’re ready to reclaim your financial power, this post will teach you how to build credit fast. 

CHAPTER 1: How Does Credit Work?

Lenders, business owners, and service providers grant credit when they trust you’ll pay back what you borrowed. They gauge your “creditworthiness” by reviewing your personal credit history – do you make good on your debts, or leave your lenders hanging?

The practice of extending credit is as old as human civilization. Historians have uncovered loan and debt collection records dating back to the dawn of modern agriculture in Sumer

Over the centuries, we’ve refined how we track consumer credit. That’s why, today, you’ll find your personal data on a consumer credit report instead of a stone tablet. 

What is a consumer credit report?

A consumer credit report contains information about your past and current credit situation, including your loan repayment history, credit card usage, and outstanding debts. 

Three US Credit Reporting Agencies

Lenders, creditors, and other entities provide information about your credit activity to credit reporting agencies (also known as credit bureaus). There are three major credit bureaus in the United States: TransUnion, Equifax, and Experian

In the past, these agencies serviced different regions of the country. Today, each agency has a national presence and most people will have a credit report on file with all three regardless of where you live. 

Your Credit Score/FICO Score

The national credit reporting agencies use data from our consumer credit reports to generate credit scores. The two most commonly used credit scoring formulas are FICO and VantageScore. Both formulas assign a credit score ranging from 300 to 850. The higher your score, the healthier your credit history. 

How does credit work? Read on for a few frequently asked questions about credit scores.

Is a FICO score the same thing as a credit score?

FICO score is a credit score derived using the FICO credit scoring formula. It’s the most commonly used type of credit score, but there are dozens of others (including VantageScore). 

What makes up a credit score?  

Your credit score is calculated using key information about your borrowing history. This includes: your payment history (timeliness and amounts); your debt-to-credit ratio; credit age; recent credit inquiries; and your credit mix (the different types of credit you use). 

If you want to learn how to build credit fast, it’s important to understand these factors and how to improve them. 

How many credit scores do you have?

Most people refer to a single three-digit number when they talk about their credit score. (Ex: “My credit score is finally over 800!) But, in reality, we each have multiple credit scores. That’s because we have three credit reports, one from each national credit bureau.

Since Experian, TransUnion, and Equifax may have slightly different information about our credit histories, the FICO and VantageScores they generate can vary. There are also dozens of other scoring models that produce their own unique credit scores.

What is the highest credit score you can attain?

The highest credit score you can attain is 850 for both VantageScore and FICO. Achieving this score isn’t easy – according to FICO, less than 2% of the US population has perfect credit.

What is the lowest credit score you can have?

The lowest credit score you can have is 300 for both VantageScore and FICO. While it’s very rare to receive the lowest credit score, you’ll feel the effects of poor credit well before 300. 

What is considered a good or bad credit score?

Most of us fall somewhere between perfect and rock bottom credit. Scores ranging from 300 - 600 are generally considered “bad” credit. The average credit score in the United States is 645. And while any score above 670 is considered “good” credit, scores above 780 are considered “super prime.” 

When we understand how credit works, we can take action to build good credit and reap the benefits of a higher score. 

How often do credit bureaus update scores?

The credit bureaus update your credit report when lenders provide them new information. Most lenders send updates once a month or every 45 days, although some lenders do so more frequently.

This means it can take up to six weeks for positive or negative activity to affect your credit scores. 

Who can use your credit report?

While a nosy neighbor can’t pull your credit report, more organizations can access this information than you might think. Banks, creditors, student loan providers, insurers, landlords, and collection agencies can all check your credit report. 

In most cases, these entities need permission to access your credit report. That’s why it’s important to regularly check only authorized parties have viewed yours. 

CHAPTER 2: How to Read a Credit Report

Most of us weren’t taught how to read a credit report. But if you want to learn how to build credit fast, it’s important to understand how to make yours more appealing to lenders. 

What is a credit report?

A credit report is a record of a borrower’s credit history. It contains information from a number of sources including banks, credit card companies, financial institutions, and collections agencies. The major credit bureaus use this data to generate our individual credit scores. 

How to get a copy of your credit report online

Once you know how to read a credit report, checking yours online is easy. You’re entitled to one free copy from the three national credit bureaus each year. Visit www.annualcreditreport.com to request yours. 

What information is on a consumer credit report?

Your credit report contains information about who you are, your borrowing history, and other relevant public information about your financial identity. 

1. Personal Information

Your credit report will contain personal information such as your name, social security number, known phone numbers, and current and past addresses.

2. Installment Loans

Definition of an installment loan

An installment loan is a lump sum of money you repay in regularly scheduled payments. These loans are usually used for major purchases like college tuition, launching a business, or buying a home.  

How do installment loans affect your credit score?

Since we usually repay installment loans over several years, they’re an opportunity to build a credit history of on-time payments. Installment loans also broaden your credit mix, a factor that considers the different types of accounts you own. 

Is a credit card an installment loan?

Credit cards are not considered installment loans. Rather than paying down a lump sum, your account balance fluctuates when you use your card. This type of credit is considered revolving debt. 

3. Revolving Debt

What is revolving debt on a credit report? 

Revolving debt is any account account you borrow from and pay down on a regular billing cycle. Credit cards and lines of credit are the two most common types of revolving debt. 

Your payment amounts for revolving accounts will usually vary month-to-month depending on how much of your credit you’ve used.

Is an auto loan installment or revolving debt?

An auto loan is considered an installment loan. That’s because you borrow a lump sum of money to buy a vehicle, and repay that debt over time.

Are student loans installment or revolving debt?

Student loans are considered installment loans. Though your total balance may increase as you take out more loans, you pay down each in monthly installments. 

4. Payment History

What is payment history on a credit report?

Payment history reveals how you’ve repaid your past and current credit accounts. It shows whether your bills were paid on-time, late, or missed altogether – and it’s the single most important factor in your credit score. 

Lesson one of how to read a credit report: If your report is color-coded, green is good! This indicates a positive payment history across your credit accounts. Red and yellow, on the other hand, spell trouble for your credit score.  

Credit reports can have different formats, but most will present important information about your payment history for loans and lines of credit on an account-by-account basis. 

For example, if you have an open credit card account, your credit report will outline how many payments you’ve made and which of those payments were on time. If you made late payments, your credit report will usually describe the severity of the delinquency (30+ days late, 60+ days late, etc).

5. Account Open/Closed Dates

Your credit report contains information about the dates you opened and closed each of your accounts. This informs lenders about the age of your overall credit history. 

How account age affects your credit score

An older overall account age is beneficial for your credit score. That’s because it signals to lenders they’re getting a clear picture of your long-term reliability as a borrower.

6. Amounts Owed

Your credit report will also tally up the total sum of the debt you carry in your various accounts. This figure is known as “amounts owed.” This amount increases when you take out a new loan or spend money using your credit card, and decreases when you make a payment.

How amounts owed impact your credit score

Although credit reports don’t include information about your income, a high overall balance suggests less room in your budget for another monthly payment. It’s more important, however, to carry a low balance compared to your overall credit limit. 

7. Credit Limits

Your credit report also shows the maximum balance (or credit limit) on each of your revolving accounts. High credit limits don't necessarily impact your credit score for better or worse; what’s more important is your overall credit usage. 

What is credit usage?

Credit usage (or credit utilization) is the amount of revolving credit you’ve withdrawn compared to your credit limit. For instance, if your credit card has a $2,000 limit and you have a $500 balance, your credit usage for this card is 25%.

The impact of credit usage on your credit score

Credit usage is one of the most significant factors in your credit score. Higher credit usage rates usually translate to a lower credit score, and vice versa. Reducing your credit usage is one of the best ways to build credit fast. 

8. Charge Offs, Collections, and Bankruptcies

If you’ve let a bill go into collections or have a bankruptcy on record, they can show up on your credit report for seven to ten years. Unsurprisingly, these items affect your credit score negatively.

9. Credit Inquiries

You’ll also find a record of hard and soft credit inquiries. A hard inquiry is when an organization requests to view your report after you’ve applied to extend credit. Soft inquiries happen when a lender requests your credit report before approaching you with an offer. 

10. Inaccurate Information

In a 2021 survey, more than one-third of Americans found at least one error on their credit report. Knowing how to read a credit report helps you catch inaccurate information before it hurts your score. 

How to dispute something on your credit report

While a typo on a past address is insignificant, other errors can do serious damage. If you notice an inaccuracy, file a dispute directly with the credit bureau that generated the report. Depending on the inaccuracy, they may require you to provide supporting documentation.

What is not included in your credit report?

Credit reports only contain data that indicates your creditworthiness. Things like income, marital status, bank account balances, shopping habits, and education don’t make the cut. 

But things like utility bills, phone plans, and rent payments aren’t on your report either – even if you always pay on time. Fortunately, there are credit builder programs like Stellar that help people build credit by paying bills.

CHAPTER 3: How to Build Credit Quickly (Even If You Have None)

If you have poor credit, you’re not alone. According to FICO data, over 30% of US consumers have scores that rank as “Very Poor” or “Fair.” 

Many things can cause poor credit, including: missing bills after a financial emergency; borrowing irresponsibly; falling victim to predatory lenders; or being denied quality credit opportunities because of systemic factors like racially biased financial policies.

With poor credit, you're less likely to be approved for things like personal loans, credit cards, and even housing. Since we live in a wealth-oriented society, you may also feel stress, guilt, and shame. 

But poor credit doesn’t have to be permanent. You can reclaim your financial power and learn how to build credit quickly – it all starts by understanding your credit score.  

What components make up your credit score?

Our credit scores are derived from our debt to credit ratio; credit age; payment history; total amount owed; and public records (aka: collections). 

1. Debt-to-Credit Ratio (Credit Usage)

Your debt-to-credit ratio is also known as credit utilization. It refers to how much credit you’re using compared to the total credit limit of all your revolving accounts.

A low ratio indicates financial security, while a high ratio suggests you’re higher-risk. 

What percentage of credit usage is good?

As a rule of thumb, lenders prefer to see credit usage below 30%. If you’ve maxed out a credit card or carry high balances, paying down these debts is one of the best ways to build credit quickly. 

Does increasing credit limits affect your credit score?

Increasing your credit limit doesn’t hurt your credit score, and can have a positive effect. But if you have a shaky borrowing history, you risk collecting more debt than you can repay responsibly. 

How to improve debt-to-credit ratio on a credit report

  • Increase payments on revolving credit accounts. Even paying just above the monthly minimum can reduce debt quicker and save you money in the long run. 
  • Avoid taking on additional debt. Try to use your credit cards less and avoid drawing from your lines-of-credit. 
  • Postpone large purchases. Give yourself extra time to save for a down-payment to fund less of your purchase with credit. 
  • Pay high-balanced cards first. Lenders look at your total debt-to-income ratio, but a single maxed out card can also ding your score. 

2. Credit Age

“Account age” considers when you opened your oldest and newest account, and the average age of all your accounts. In theory, an older credit history paints a clearer picture of your reliability as a borrower. 

How to improve age of credit history on a credit report

  • Don’t close accounts in good standing. Open accounts stay on your credit report indefinitely, while closed accounts fall off after seven years and reduce your credit age. 
  • Start building credit early. If you have no credit or young credit, the only way to improve your age of credit is – time. 
  • Don’t open accounts you don’t need: Opening several new accounts reduces your overall age of credit. (This goes for revolving and installment credit.)

Will closing a new credit card help my credit age?

Closed accounts stay on your credit report for seven years, regardless of how long you used them. So, closing a new credit card won’t change your credit for better or worse. 

3. Payment History

Payment history shows how you’ve repaid your debts – and it’s one of the most important factors in your credit score. It considers all your loans and lines of credit, and whether or not you’ve paid them responsibility. 

How to improve payment history on a credit report

  • Pay your bills on time: This may sound simple, but a few missed payments can cause your credit score to nose-dive. Credit solutions like Stellar help people build a strong history of on-time payments. 
  • Get and stay current: If you have delinquent accounts, get current on these first. Missed payments affect your score less over time, so getting in the green is better than ignoring an overdue bill. 
  • Work with  lenders: Contact your lenders to see if you can lower your interest rates to get caught up quicker and pay future bills on time. 

4. Public Records

The only public records allowed on your credit report are bankruptcies, tax liens, and civil judgements. These items are generally considered negative and stay on your report for seven to ten years (unless you pay the outstanding debt and request a withdrawal). 

How to remove negative items from credit report 

Getting negative items off your credit report usually starts with paying your outstanding debt. Contact the debt-holder directly to understand your best course of action. In some, but not all cases, you may be able to enter a repayment agreement or negotiate a partial-payment to get the item removed. 

Getting negative items off your credit report can be tricky, you’ll build credit fast once they’re gone. 

Beware that some services that claim to erase your negative credit history are not necessarily as helpful as they appear to be. In fact, some are downright illegal. Use common sense and always consult a certified financial advisor before you allow an outside entity to access your credit

What if you don't have a credit score?

If you don’t have a credit score, it’s usually because you have what’s called a “thin credit file.” This means you have very little credit history, or none at all. 

Over 45 million people in the United States have thin credit files. This may be because they’re young, skeptical of taking on debt, or have had difficulties finding opportunities to build credit because they have none. 

Fortunately, you can still build credit quickly without a credit score. Step one? Take action to build your credit history. 

How to build credit quickly with no credit history

It’s hard to get approved for a loan or line of credit when there’s nothing on your credit report to prove you’re a responsible borrower. 

When you’re starting from zero, you need to limit risk to the lender. There are three common ways to build credit: open a secure credit card; find a co-signer; or become an authorized user. 

1. Open a secured card

Some consumers looking to build credit fast with no credit history opt for a secured card.

Secured credit cards require an up-front cash deposit, usually equal to the card’s credit limit. When you close a secured account in good standing, you’ll get back your cash deposit. 

How to use a secured card to build credit 

Until now, secured cards have been the most accessible method for building or repairing credit. Most major credit card issuers offer secured credit cards. 

Once you make a cash deposit to open your account, they work just like regular credit cards.

If you pay your monthly bill on time, you’ll build a positive credit history. 

Drawbacks of a secured credit card 

Secured cards require you to use your own money to back the amount owed. For many borrowers, this up-front investment can be disruptive to their budget. 

Borrowers may use up their savings to obtain a secured credit card, which increases the risk that an emergency expense will wreak havoc on their finances. Without a cushion, a medical bill or car repair bill can create a chain reaction of late or missed payments that ends in financial disaster.

Additionally, because secured credit cards usually come with low balances, it’s easy to reach a credit utilization ratio that can sink your credit score.

What’s the difference between a secured and unsecured card?

Secured and unsecured cards can both help you build credit quickly when used responsibly. The only difference is that secured cards require a cash deposit to reduce risk for the lender.

When it comes to secured vs. unsecured cards for people without credit – secured cards are the clear winner. 

2. Use a cosigner

Another way to build credit fast is by using a co-signer. A co-signer is someone – usually a parent, family member, or close contact – who commits to paying back a debt if you do not. 

Finding a co-signer with a positive credit history is a win-win for you and the lender. The lender takes on less of a risk, and you get approved for credit you wouldn’t have otherwise. 

Just make sure to pay your debt responsibly, or you’ll have an unhappy cosigner. Because your payment activities will also reflect on your cosigner’s credit report, any late payments can cause serious issues between you and your cosigner. For this reason, finding a willing cosigner is typically very challenging.

3. Become an authorized user

One way to build credit when you have none is by becoming an authorized user. This means you can use someone else’s card. If the credit card company reports authorized users to the nationwide credit bureaus, the account will show up on your credit report. 

Becoming an authorized user doesn’t build credit as fast as having a card of your own, but it’s a good place to start. Just make sure you work with someone who pays their bill on-time, or this approach can backfire. 

How long does it take to build credit?

According to Experian, it can take between three and six months to build enough credit history to calculate credit score if you're starting from scratch. Building good credit, or recovering from poor credit, can take a little longer. But by being patient and responsible – you’ll get there.  

FAQs: How to build credit fast

Does paying rent build credit?

Unless you work out an agreement with your property management company, rent is not automatically reported to all credit bureaus. Some lenders, like Fannie Mae, opt to accept rent payments as a measure of creditworthiness, but this policy is far from universal.

Do utilities build credit?

Utility companies don’t report your payments to the credit bureaus unless your account goes delinquent. Any positive activity is off the record, but any negative information will unfortunately affect your score.

Does having Netflix build credit ?

All those years of paying your Netflix subscription on time might make you a dream customer, but it doesn’t show up on your credit report, unless you use an innovative credit building program like Stellar.

With StellarFi, your bills build your credit

StellarFi is a credit building tool unlike any other. As a public benefit corporation, StellarFi aims to erase the systemic factors that lead to credit and wealth inequality

From historic practices such as redlining to modern barriers like the old “it takes credit to build credit” conundrum, our credit process holds back millions of Americans who deserve access to the benefits of good credit.

How can you build credit by paying bills?

With the StellarFi app, anyone can use their monthly expenses to raise their credit score and create their credit history:

  1. Download the Stellar app
  2. Link your bank account
  3. Add your bills, such as utilities, subscription services, and more
  4. Your payment comes out of your account just like it would without Stellar. 
  5. We report your on-time payment to the three major credit bureaus: Experian, TransUnion, and Equifax.
  6. Your credit history improves

With Stellar, you can build credit history with rent payments, your phone bill, and even your Netflix or Amazon Prime subscription.

You pay all these bills every month, you should get some credit for it!

Get started with Stellar

Signing up is easy. The more bills you link, the more impact you’ll have on your score. Ready to check it out?

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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.

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