4 Ways to Build Credit Fast (2024)

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Co-authored bywikiHow Staff

Last Updated: October 10, 2022References

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   Pay rent on time. A lot of people who have little in the way of traditional credit do rent a home or an apartment and pay rent on time. Most renters don't get credit for their rental payments on their credit report, but that doesn't have to be the case. There are several services which (for a fee) will report your rental payments to one or more of the major credit bureaus, and tell you which credit cards and lenders will take your rental payments into account.^[1]

   • There are quite a few rental reporting services, all coming in at varying price points. One of the best is RentTrack, as they report to all three credit bureaus and are priced very modestly.
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   Obtain a credit-builder loan. The term “credit-builder loan” is somewhat of a misnomer. In reality, it isn't much like a loan at all. While you might apply for a credit builder loan like any other type of loan, the bank doesn't give you the money it lends. Instead, it deposits the entire amount in a savings account. You make monthly payments on the loan, and when it's completely paid off, they release the funds to you.^[2]

   • Credit-builder loans have their good points and bad points. The advantage of a credit builder loan is that it does usually improve your score—by about 30-40 points. The disadvantage is the interest; you still pay interest on the loan. So it's less like a loan than it is a subscription service to improve your credit score.
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   Apply for low balance credit card. “Starter” credit cards are low-balance credit cards with high interest rates and often an annual fee. They are offered to people with no credit history to help them start building their credit score. They should be used for small purchases. Try to pay off the full balance every month to start building good credit.^[3]

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   Use store credit for large purchases. If you are just moving out on your own for the first time, you may need many expensive items like furniture, appliances, or even a car. These can be difficult to purchase without any credit. The store or dealer may offer financing options, including store credit. Many of these may be interest free for a certain period.

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   • Store credit cards often offer discounts on their goods. While they have high interest rates, they are often available to people with no or low credit scores. If you need appliances or furniture, you may want to open a card with a store.^[4]
   • If you need a vehicle, you can use dealer financing to purchase or lease one. Remember to choose a car within your budget. Do not buy a car unless you absolutely need one to get to work or school.
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   Give lenders incentive to extend credit. Many lenders may not be eager to extend credit to someone with no payment history. If they are unwilling to give you a low balance card or a decent loan, you might try to convince them by lowering their risk. There are two primary ways of doing this. You can get a co-signer for your loan or you can sign-up for a secured credit card.

   • Finding a co-signer is one of the most effective ways of building credit when you have none. A co-signer agrees to make payments on the debt in case you default. They assume responsibility, and it is their creditworthiness dictating the terms of the loan.^[5]
   • Secured credit cards are like credit-building loans in that they're not really credit—they are subscription services that improve your credit score. The subscription costs come in the form of interest and other fees.^[6]

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   Review credit card activity each month. When you receive your credit card statement, read over it carefully. Make sure that there are no incorrect transactions, and watch for signs of fraud. Report any purchases that you did not make.

   • This can help you track your purchases and keep a budget as well. If you are spending too much on something, you can identify it and cut back.
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   Make your payments on-time. Payment history is the biggest single factor determining your credit score, accounting for about 35%. It's simple advice, but easier said than done. Nonetheless, over the long term, it's the best way to rehabilitate your credit.^[7]

   • Pay debts according to the terms set forth in your contract. Make sure to pay at least the minimum payment (but ideally more) before or on the due date. Avoid paying late, and never miss a payment.
   • You may want to set up automatic bank drafts if you're worried you'll forget about payments. These will automatically take the money from your account each month.
   • The best way to build credit fast is to pay the full balance on your credit card each month.
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   Establish diverse sources of credit. Once your credit is rehabilitated to the point that you can qualify for a loan, you should take out a small loan or line of credit in a different form than the type of credit you already have. The mix of credit is only about 10% of your total score, but it is a factor.^[8]

   • For example, if you only have one credit card, purchase an appliance on an installment plan or take out a small personal loan. It's never a bad idea to save up the amount of the loan before you apply, put it in a separate account, and simply have the loan payments automatically draw from that account.
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   Limit requests for new credit. Applying for too many lines of credit may reduce your credit score. Avoid applying for new credit frequently. If you feel that you need more credit, try asking for a credit increase on a current card instead.

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   Check your credit reports and your credit score semi-annually. You can get a free credit report from each of the credit bureaus once a year (meaning up to three different occasions). The report is a comprehensive picture of your credit history—what you've paid and when you paid it, what your debts are, and when you applied for new lines of credit. Your score is an estimate of your potential credit risk. They are two measures of your financial health, and it's important to know both.^[9]

   • Check your credit report at https://annualcreditreport.com.
   • You are able to request a free credit report from each of the credit reporting agencies (Equifax, Experian and TransUnion) once every twelve months.
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   Correct mistakes in your credit report. By law, everyone gets one free credit report from each credit bureau per year. Just go to https://annualcreditreport.com, provide your name and identifying information along with your addresses for the past two years. Once you get your report, examine it for any mistakes. As many as one in five Americans has an error on their credit report, so check diligently. A mistake can be virtually anything, like a bankruptcy attributed to you when you never went bankrupt, or a bill a creditor says is delinquent when it isn't.^[10] If you find a mistake, do the following:^[11]

   • First, point the error out to the credit bureau itself. Send a physical letter via certified mail, along with a copy of the report and any documentation supporting your claim. Look at a sample letter to see how to do this.
   • Repeat the process with the creditor (not the credit bureau) who has filed the incorrect information. Request that the creditor send you courtesy copies of any correspondence they initiate with the credit bureau.
   • It's always best to put everything in writing when you're dealing with creditors or credit bureaus. Writing makes them accountable for their words, and ultimately, for their claims to you.
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   Contact regulatory or legal authorities. After you dispute an item on your credit report, the reporting agency is obligated to make an investigation with in thirty days. Although it would be nice if the credit bureaus always did the right thing, sometimes they don't. And sometimes those mistakes are so big the consumer has no choice but to go the legal route. If you're at the end of your rope, contact the following:^[12]

   • The Consumer Financial Protection Bureau (CFPB), which is one of the newest federal agencies, is the watchdog organization policing the credit bureaus. If you would like to file a complaint against a credit reporting agency, you can do so at http://www.consumerfinance.gov/complaint/#credit-reporting.
   • Your state's attorney general or offices of consumer protection are your next best bet. All states don't have an independent consumer protection agency, but the state where you reside does, start with them first, as they have the most experience with consumer complaints. Find your attorney general at http://www.naag.org/naag/attorneys-general/whos-my-ag.php
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   Build emergency cash savings. Emergencies can be costly, but you should avoid using your credit card to cover them if possible. Try to save up at least three months of your wages in an emergency fund. Use this money if a medical emergency or unexpected unemployment occurs.

   • Three month's wages is a general guideline. Some people, especially those with families to support, may want to save up more.
   • To start your emergency fund, put aside a little of money from your paycheck each month.^[13]

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   Learn what your credit score means. A lender uses credit scores to determine how likely it is that you will pay your debts on time. Your credit score is based on a number of factors, including your payment history, current unpaid loans, history of bankruptcy or foreclosure, and the number of loans you have out.

   See Also

   15 Ways to Improve Your Credit - Due

   • There are three agencies that collect information and report on your credit score. These are Equifax, Experian, and TransUnion.
   • FICO scores are the most common type of credit score. They range from 300-850. A good credit score is over 700 while scores under 600 may make it difficult for you to borrow money. FICO requires six months of credit history for a score.
   • VantageScores also run from 300 to 850, and they will assign a letter grade from A to F on your score. They only require one month of credit history.
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   Negotiate negative items off your report. It's not a foolproof strategy, but you can sometimes negotiate with a creditor to remove a negative item from your report. Counterintuitively, this works best when you still owe money to the creditor. Try the following:^[14]

   • Write your creditor and offer to pay the balance of the account if they will remove the item from your credit report (or at least mark it as “paid as agreed”). If they agree to your offer or you agree to their counteroffer, get the agreement in writing and uphold your end of the bargain.
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   Limit credit to 30% of amount available. If you've got a credit limit of $1000, you should be able to charge $1000, right? Actually, if you want to keep your credit score in good shape, it's best to carry a balance of no more than 30% of your available credit (and no less than 10%). ^[15]

   • This is called the “amounts owed” section of your credit score, which isn't the most straightforward name. It means the amount owed relative to your credit limits, and not the entirety of the amount of debt owed. A credit score is based on a variety of factors, including payment history, total debt load, and length of time accounts have been open. The amounts owed is one of the most important components of the score, and it's also one of the simplest to tweak.
   • If you can't afford to get your balance down below 30% of your limit right away, one possible fix is to call your credit card company and ask for a higher credit limit.
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   Avoid closing lines of credits. If you cancel a card or another line of credit, the total amount of available credit you have will lessen, which will negatively affect your score. If you have one card you don't use very much, charge a small recurring bill, like a phone bill or a trash bill, to the card. That will keep it active and with a small but manageable balance.^[16] (note that their use should be avoided except in emergency)

   • Avoid using these extra lines of credit unless you absolutely need to because of an emergency.

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   Determine the cause of your bad credit. If you can identify what is causing your bad credit, you may be able to take control over it. In some cases, people fall behind on their credit because of things happening in their personal lives.

   • If you spend more than you make each month, you will need to stick to a monthly budget so that you can start paying off debt and increasing your credit score.
   • Sometimes unpredictable life events happen. Losing your job or getting sick can cause you to rely heavily on credit while spending your savings. Creditors are often willing to work with people experiencing hardship. Eliminate unnecessary spending, renegotiate your debt, and ask family for support.
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   Review spending habits. Write down everything that you buy in a month. This includes food, drinks, entertainments (such movie tickets and video games), restaurant bills, clothing, and other products. Tally up how much you spend on these, and look for ways to reduce unnecessary spending.

   • For example, try not to buy new clothes unless you need them. You can buy clothing on sale or go to a second-hand clothing store for deals.
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   Develop a budget. A budget will help you determine exactly how much money you can spend a money while still saving and paying off your debt. You should write down all of your expenses, such as rent, bills, utilities, entertainment, gas, and food. Look for areas where you can reduce your spending so that you can save more money.

   • Your budget should include how much each month you plan to save. Set this money in your savings account when you first get paid. You should do the same for credit card statements and debts.
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   Speak to a reputable credit counselor. A reputable credit counseling service can do wonders for your financial well-being. They offer a variety of services, including budgeting and money management classes, but one of the most useful is debt consolidation through debt management.^[17]

   • Debt consolidation is a process by which the credit counseling service collects a complete statement of all of your debts. They contact your creditors and work out a payment plan. You pay the credit counseling service, and they distribute the payment to your creditors at an agreed-upon rate. For many people, it is an effective way to bring accounts current and climb out of debt.
   • The National Federation for Credit Counseling is a non-profit association of reputable credit counseling agencies.
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   Negotiate a new payment plan. You may be able to negotiate with your creditors on a new payment plan. This might be one with new monthly payments or lower interest. You may be able to offer them a lump-sum payment for part of the debt in exchange for forgiving your late fees. Reach out to your creditors to see if they are willing to negotiate.

   • Explain to your creditors any hardship in your life that might affect your ability to pay. For example, unemployment, hefty medical bills, or a death in the family may convince them to help you out.
   • Talk to them calmly. Do not demand things or yell at the creditor.
   • Once you arrive at an agreement, ask for a copy in writing from them.^[18]

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