Can you build credit fast? 8 tips to get you started

Having good credit can help you qualify for the best interest rates and repayment terms on a mortgage, personal loan, or auto loan. Though there’s no way to really build credit fast, you can use some strategies to get your credit score moving in a positive direction.

Even if you don’t plan to apply for credit any time soon, it’s important to know how to build your credit score for when you do.

• 8 ways to build credit
• Debt consolidation loan: What to know
• Building credit FAQs

8 ways to build credit

Whether you’re just starting out on your credit-building journey or you’ve had a few credit missteps along the way and want to improve your score, you should know that there’s no quick fix. But you can work to build your credit in several different ways, which can increase your score over time and help you reap the benefits when you apply for financial products in the future.

1. Pay your bills on time

The most important thing you can do to establish a positive credit history or boost your current score is to pay all your bills on time, every time. Your payment history makes up 35% of your FICO Score, which lenders look at when deciding whether to approve you for credit products. Even missing one payment or making a payment late can show up on your credit reports and damage your score.

It’s not uncommon for creditors to report payments more than 30 days late to the credit bureaus. If you regularly miss payments, all the other payoff strategies mentioned below will become less effective.

2. Become an authorized user

Becoming an authorized user on someone else’s credit card can be another way to build your credit. The cardholder will contact their credit card company to add you as an authorized user on their account.

You’ll receive your own credit card that you can use, but you aren’t legally responsible for making the payments. The primary cardholder’s payment history will appear on your credit account, giving your score a boost. On the flip side, if the primary cardholder misses payments and racks up debt, it can hurt your credit.

It’s a good idea to talk to the primary cardholder (often a parent) about how you’ll plan to pay for any charges you make. And keep in mind that the primary cardholder can remove you as an authorized user at any time.

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3. Apply for a credit-builder loan or secured loan

If you have no credit or poor credit, you might consider a credit-builder loan or a secured loan.

With a credit-builder loan, the lender puts the loan amount into a locked savings account. You make payments to the lender until the loan term is up — usually six to 24 months.

The lender will report each payment you make to the credit bureaus, which can help build your credit as long as you make your payments on time. At the end of the loan term, the lender will disburse the full loan amount to you. You may or may not earn interest, depending on the lender.

A secured loan requires you to provide an asset as collateral to qualify for the loan, such as a car or savings account. If you miss payments or default on the loan, the lender can take your collateral. You may be eligible for a lower interest rate on a secured loan versus a traditional unsecured personal loan, but you may not qualify for a large loan amount if you have a limited credit history.

4. Find a cosigner with good credit

Adding a cosigner with a good credit score to your loan — such as a family member or close friend — can increase your chances of loan approval if you have no credit or poor credit and can’t qualify independently.

Your cosigner is responsible for the loan if you can’t make your payments. But if you make all your payments on time, your credit can improve. A cosigner can also help you qualify for a lower interest rate and better terms than you might be able to get on your own.

5. Get credit for paying your bills

If your lenders or creditors report to the credit bureaus, you can build your credit by making on-time payments every month. But since credit reporting is voluntary, not all of them report your payments.

If you rent, talk to your landlord about reporting your payments to the credit bureaus. They’ll need to report your rent payments through a third party service, which may include a fee. You can also research rent-reporting services and enroll on your own. As your positive rent payments are reported to the bureaus, it can help improve your credit over time.

6. Monitor and dispute errors on your credit report

Errors can sometimes show up on your credit reports — like payments reported as late that you made on time or credit accounts you didn’t actually open — and drag your score down. It’s a good idea to monitor your credit reports at least once a year for any errors or potential fraudulent activity.

You can request free copies of your credit reports once a year from the three main credit bureaus — Equifax, Experian, and TransUnion — by visiting AnnualCreditReport.com.

You can also call 1-877-322-8228 or complete the Annual Credit Report Request Form and mail it to:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

If you spot any errors on your reports once you receive them, you can dispute them with the appropriate credit bureau.

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7. Request a credit limit increase

One of the best ways to boost your credit score (although it could take a while) is to pay down existing debt, which can lower your credit utilization — how much you currently owe divided by your credit limit.

If you’re planning to make a big purchase or consolidate other high-interest debt, it can be a good idea to request a credit limit increase. Credit card companies will sometimes increase your credit limit automatically, but you can also contact them directly to request an increase. If your credit card company pulls a hard inquiry on your credit when you request an increase, it can temporarily lower your score by a few points.

And keep in mind that a credit increase can set you up for failure if you can’t make your payments. It may also be tempting to overspend, which won’t lower your credit utilization or help you build credit.

8. Pay down existing debt

Besides boosting your confidence, paying down your debt can allow you to start an emergency fund, reduce how many bills you pay each month, get control of your budget, and improve your credit score.

Paying down your existing debt will also lower your debt-to-income (DTI) ratio, which is the percentage of your gross monthly income that goes toward your monthly debt payments. When you apply for a loan, lenders look at your DTI ratio to determine whether or not you’ll be able to repay a new loan. The lower your DTI ratio, the better your chances of getting approved.

Debt consolidation loan: What to know

A debt consolidation loan is a personal loan that combines multiple debts into one, preferably with a lower interest rate. If you have many debts, a debt consolidation loan can help you by streamlining multiple monthly payments into a single payment, which can make it easier to budget. If you’re committed to making all your payments on time, your credit can improve.

But you’ll typically need good to excellent credit to qualify for the best interest rates. Some debt consolidation loans also come with added fees, such as origination fees for processing the loan and prepayment penalties if you pay off your loan ahead of schedule. If your credit score isn’t high enough to qualify for a lower rate than what you’re paying on your existing debts — or a loan comes with hefty fees that will outweigh the benefits of consolidating — then a debt consolidation loan may not make sense.

Building credit FAQs

If you’re working on your credit, here are answers to frequently asked questions that might be helpful for your credit-building journey.

What if you have no credit?

If you're "credit invisible," it means you have little or no credit history that’s been reported to the credit bureaus, so you have no credit score. This can make it very difficult to obtain a credit card, car loan, or mortgage.

If that’s you, start building a credit history by becoming an authorized user on someone’s credit card or applying for a credit-builder loan. Have your landlord report your payment history to the credit-reporting agencies if you rent. Building credit takes time, so it’s a good idea to work on establishing credit before you actually need it.

What is a bad credit score?

The big three credit-reporting agencies — Equifax, Experian, and TransUnion — use similar credit-scoring models when determining your score, but they aren’t always the same since there are multiple scoring models. The scoring model that lenders use most is FICO. A credit score that’s considered bad is generally 580 or lower.

How are credit scores calculated?

Five major components make up your FICO credit score. Each is weighted based on varying levels of importance:

• Payment history (35%) — Shows lenders if you’ve made past credit account payments on time
• Amount owed (30%) — How much available credit you’re using and if you’re overextended
• Length of credit history (15%) — The age of your credit accounts
• Credit mix (10%) — What kinds of credit you have, like a mortgage, car loan, or credit cards
• New credit (10%) — How many new credit accounts you’ve opened in a short time

Can you raise your credit score in 30 days?

Building credit takes time, and there are no shortcuts to achieving an excellent credit score. But you can take steps to potentially boost your score in 30 days:

• Reduce the balances on your credit cards to near zero or zero.
• Increase your available credit limit, which reduces your credit utilization ratio.
• Get a personal loan to pay off high-interest debt.
• Your payment history makes up 35% of your FICO Score, so if you’re worried about making an upcoming payment, ask your lender if it offers a one-time late payment forgiveness option so that your credit score won’t drop.