There are different factors having their shares in increasing or decreasing your credit score. Now, coming to your question “how to build credit fast.” You have to work on all these factors to improve your credit scores. The following table lists these factors and the respective credit score calculation weight:
|Credit Factor||Credit Score Weight|
|Number of Inquiries||10%|
|Different Types of Credits||10%|
The number and type of credit cards you have and the way you use them; this has an impact on your credit score.
Once you have received your credit card, start using it to build your credit score. Make purchases and pay off on time. You should also keep your credit utilization low (less than 30%). However, in addition to purchasing and timely payments, there are different ways you can improve your credit score using credit cards.
Your credit card can increase your credit score even when it is locked in a drawer. The key is, get a credit card as soon as possible and don’t miss any payment. As you can see in the table, the credit score weight of payment history is 35%. So, use your credit card to create a payment history. Here is an ideal approach for you.
How To Build Credit Fast With Credit Card?
Here is what you can do:
- You can apply for a starter credit card or a secured credit card.
- You can set up automatic payments from a bank account.
- Ideally, you should use 1%-10% of your credit score. Make sure that it is less than 30%.
- Make full payments by the due date. This will also save interest.
- If one of your family members have a good credit score, you can become an authorized user on that member’s credit card.
Errors can bring down your credit score. So, regularly monitor your credit.
A Strategy For You
Make Purchases And Timely Payments
Making purchases and then paying off on time create an impression that you can responsibly handle your debts. When you stick to your payment deadlines, creditors and lenders can trust you. If you are not borrowing any money, there is no way a creditor or lender can figure out whether you are reliable or not. 0% utilization of your credit card is not going to help. Make purchases every month and pay off before the due date.
Typically, you get a grace period to make your payments. After that grace period, you have to pay interest as well. Late payments are reported to credit bureaus which reduces your credit score. So, pay on time and pay in full.
Open It & Lock It Away
Positive information goes on your credit report even when you are not using your credit cards. It’s because it is your “current” account and you are not desperate to use it. Though not fast, this will improve your credit score.
Become An Authorized User
You are not grown enough to get a credit card. Or, you are not getting a credit card due to some other reason. Still, you can build your credit and then improve without having a credit card. You can do this by becoming an authorized user on someone’s account. You will get a card connected to the account of that person. You will be able to make purchases. That person will be responsible for making payments and account information will go on your credit report as well. This strategy will not build your credit fast, but it is worthwhile.
Some Key points to remember
Get The Right Credit Card
Do research before applying for a credit card. Keeping your needs in mind, compare the terms and conditions of all the options.
Pay On Time
Don’t miss any payment. It is important to have a good payment history. This will also increase the credit limit and improve future approvals.
Pay In Full
This may not always be possible, but when it is, pay in full.
Watch Your Credit Limit
Don’t use your credit limit of more than 30%. Keep it between 1%-10%.
Check Your Credit Score Regularly
Checking credit scores regularly will keep you on the right path. You can find, report and dispute errors.
Get Popular Credit Cards
Credit cards for college students, starter credit cards, and there are several other popular cards that can help in improving your credit score.