Building credit can feel like a long, drawn-out, and exhausting process. The simple act of carrying debt can even seem like a burden. However, showing that you can pay down that debt will result in a good credit score. This can open so many doors for you as a consumer. You’ll get approved for loans and credit cards more easily, pay lower interest rates, and you’ll have more negotiating power.
If your score is low, you might think you’re months or years away from these financial advantages. However, there are ways you can speed up the process. You must choose your loan company carefully, who is best in the industry like- debt consolidation to pay off debt. If you’re interested in building credit quickly, here are seven things to do.
1. Use a Secured Credit Card
Everyone has been struck by the counterintuitive nature of building credit at some point during adulthood. Most of your life, you were probably told that it’s bad to have debt. But as an adult, you find out that you usually need debt in order to build credit. It’s mind-boggling when you think about it.
However, there may be ways to work around that confounding concept. One option to build credit, and avoid getting overwhelmed by debt, is to get a secured credit card.
These cards are great credit builders because they’re backed by a cash deposit. Instead of borrowing money from a lender, you’re using funds that you previously deposited. Your credit limit is equivalent to the cash deposit you put down, and on-time payments help you build credit. Secured cards are a great way to build credit, and they’ll help you avoid the possibility of accruing massive debt.
2. Never Miss a Payment
If you want to build credit, making late payments is a terrible thing to do. All of your other efforts will be for nought if you’re making payments late, or not making them at all. That’s because payment history is the single most important factor in determining your credit score.
Payment history makes up 35% of your credit score. It has a bigger impact than any other factor. Not only that, but a late payment can stay on your credit report for several years. Whether you have to make a calendar or set reminders, make sure you know when your payments are due. Better yet, set up automatic payments to be sure you never miss a due date.
3. Make Frequent Payments
Once you’ve mastered making regularly scheduled payments, you should then start making frequent payments. The key to building credit fast is paying down your debts fast. If your budget allows for it, make more payments than you’re required to. The faster you pay down a balance, the better your credit will be. Plus you’ll accumulate less interest.
It’s not only the simple act of making payments that will help you out. Carrying a lower balance is also key to boosting your score. For a good FICO score, it’s recommended that your balance be lower than 30% of your total credit limit. Making frequent payments will help you pay off your debt faster. By not carrying a high balance, you’ll also prove that you are managing credit responsibly.
4. Request a Higher Credit Limit
You may think that paying off debt is the only way to build credit. While it certainly helps to pay off balances, it’s not the only way to boost your score. If you have a history of making on-time payments, requesting a higher credit limit could also improve your credit score. A higher credit limit means a better credit utilization rate.
Your current balance divided by your credit limit determines your credit utilization rate. You want that number to be low. By requesting a higher limit, you can lower your utilization rate. Then your score will go up, and you’ll be more creditworthy.
Just remember, a higher limit doesn’t mean you should spend more. Otherwise you’ll end up right back where you started—in need of a credit improvement plan. Ask for a higher limit, and then continue to pay down your balance. Your score will improve even more.
5. Try to Limit Credit Card Use
Getting and using a credit card is an important aspect of building credit. However, the number of times you swipe your card isn’t going to directly affect your credit score. You just need to use the card to demonstrate that you can pay the balance down.
If you limit how often you use your cards, this process is easier. You can pay down your balances faster. And paying down your balances definitely will have a positive impact.
Create a budget and try to limit credit card charges to one or two categories of expenses. For example, put gas and groceries on your credit card. Just make sure you have enough to pay those purchases off each month. This way, you’ll be proving your creditworthiness with on-time payments.
6. Pay Off Your Debts
Paying off a card’s full balance is one of the fastest ways to boost credit, usually by a lot. In fact, paying off any of your debts can do a lot of good.
It may seem overwhelming, or even impossible, to pay off all your debt. However, there are a number of ways to make the process easier. One great strategy is to tackle one debt at a time. You can start with the smallest and work your way up. Or you can start with the loan with the highest interest rate. Once one balance is paid off, work on the next one.
7. Use a Variety of Credit Types
When it comes to the types of credit accounts, don’t be afraid to mix it up. Lenders like to see that you’re able to handle a variety of accounts responsibly. Think credit cards, student loans, and automobile loans.
If you find that you’re carrying several of the same types of accounts, consider trying something else. For example, some people carry most of their debt on various credit cards. Most credit cards are the same credit type, so any number of cards won’t build a good mix of credit. So if you’re one of these cardholders, consider a small personal loan for your next big purchase.
Yes, the world of credit can seem like a crazy and confusing place. Educate yourself about what you can do in the short term to build credit. These will help you form good financial habits in the long run.
The road to excellent credit can seem like a long one. However, there are things you can do now to make that road much shorter. Take it day by day, and you’ll start to see that number go up.
