7 Steps to Build Credit Fast
All right, now that you understand how credit works, let’s explore the nuts and bolts of building your credit score.
Step 1: Check Your Credit Report & Fix the Errors
The credit bureaus process billions of transactions every single day. You’re smoking crack if you think they don’t make mistakes all… the… time.
And look, it’s not their responsibility to ensure your credit report is accurate. It’s yours.
So, check your credit report for errors before you do anything else. Once a year, you can pull your credit report for free from AnnualCreditReport.com—it’s mandated by federal law.
While it’s free once a year, it’s not a complete credit report. It doesn’t include your credit score and isn’t particularly user-friendly. And once a year isn’t enough if you’re looking to build good credit.
Fortunately, you can run your own credit report (and other background checks) using the tenant screening feature in our landlord app. Depending on whether you’re using a free or premium account, the report costs between $9 and $15 and includes your credit score and complete credit history.
What do you look for when you pull your credit report? Look first for accounts that aren’t yours or accounts that should be reported but aren’t.
Next, look for incorrect late payments. If you paid on time, but your payments are showing as late, you need to contact the credit bureaus to let them know.
Lastly, look for any negative public records (bankruptcies, liens, foreclosures, etc.) that aren’t yours.
Credit bureaus make mistakes, and you must fix them if you want to build your credit.
Step 2: Get a Credit Card If You Don’t Have One
Yes, many people abuse credit cards. In fact, the average household credit card debt is up to $6,295 as of the end of 2023. Ugly.
But to establish your credit history, you need to have some credit records reporting. As a first credit card, don’t expect to be approved for the ritziest cards with the best rewards. Your first priority is building credit, not rewards.
If you get turned down for a traditional credit card, you have two options:
- Get a cosigner, such as a family member, to sign as a guarantor for your credit card or
- Get a secured credit card.
Secured credit cards require a deposit from you as collateral against default. If you fail to pay them, they just take the collateral. Then, they ruin your credit by reporting your default to the credit bureaus.
Use your credit card sparingly. As a first credit card, just put one recurring monthly bill on it and set up recurring monthly payments to your card to cover it. That way, it’s all automated, and you don’t even need to remember to pay for it.
Later, you can get fancy, like using your credit cards to buy real estate or score free travel, but right now, you just want to establish a credit history to build credit fast.
Bonus Option: Become an Authorized Signer on Someone Else’s Card
One alternative to having someone else cosign your credit card is becoming an added signer on someone else’s credit card. The credit bureaus report the card balance and payments on your credit history, too.
Just make sure the person is responsible about paying their card on time every month, and don’t use them unless you have their express permission. Building your credit isn’t worth ruining relationships over!
Step 3: Get a Credit Builder Loan
One credit card isn’t cut it when you’re looking to build credit quickly. Remember, part of your credit score calculation is based on your mix of credit accounts.
So, open a credit builder loan as another type of credit account. “Loan” is a misleading term, as you’re the one who’s lending the money. It works like this: you agree to make a series of payments over a certain period, say $40 monthly for 18 months. The “lender” reports your payments as on time throughout the loan, and you get your money back at the end of the loan term.
Well, most of it, anyway. They keep a little for the trouble of reporting your payments to the credit bureau. There is no such thing as a free lunch, after all!
But as you look for how to build credit fast, credit builder loans offer another tool in your kit.
Step 4: Diversify Your Credit Types (To A Degree)
Diversifying your credit accounts can be a good way to increase your credit score. The reason is self-explanatory—if you can juggle multiple credit lines simultaneously without dropping any of them, you demonstrate the type of financial responsibility lenders want to see.
Here are some of the different credit types you can try:
| Credit Type | How It Helps |
|---|---|
| Credit Cards | Shows ability to manage revolving credit |
| Installment Loans | Demonstrates reliability with fixed payments |
| Mortgage | Indicates responsibility with significant loans |
| Auto Loans | Reflects capability in handling term-bound debt |
| Retail Accounts | Helps by adding a mix of credit lines |
| Personal Lines of Credit | Offers flexibility and variety in credit management |
However, you shouldn’t go gung-ho with your applications. You need to space them out in a reasonable time frame (which we’ll discuss later.)
Step 5: Ask for a Credit Line Increase
Remember how the credit bureaus look at the ratio of credit used to credit available?
For rotating lines of credit (like credit cards), you can improve this ratio simply by getting a higher credit limit. If you routinely put $1,000 on your credit card every month, but your credit limit is only $2,000, then you’re using 50% of your monthly limit. Bump the credit limit to $5,000; suddenly, you only use 20% of your monthly credit.
As you build your credit history, creditors will be more willing to raise your credit limits.
Step 6: Have Your Rent Payments Reported to the Credit Bureaus
If you’re a renter, one way to build credit fast is by reporting your rent payments to the credit bureaus.
Of course, you don’t have complete control over this. You’ll need to ask your landlord to collect rent using a service that reports your payments. But it helps them, too, since it serves as an additional incentive for on-time rent payments.
We’re preparing to add this feature to our online rent collection service – hint hint!
Step 7: Consider Credit Repair Services
While not everyone needs credit repair services, they can be an effective tool for improving your credit faster.
They’ll handle credit reporting errors and disputes for you and show you exactly what to do to boost your individual credit score. In some cases, they can even negotiate on your behalf with creditors.
If you’d rather get some assistance than go it alone, check out Credit America, a great example of a credit repair service.
Credit repair services work by reviewing your credit history with a fine-tooth comb and identifying discrepancies and inaccuracies, including unfair and unverifiable claims. The timeline for results can vary from thirty days for simple issues to longer for more complex ones.
Sidenote: Any credit repair service that claims they can fix your credit score immediately is not to be trusted.
