With a pandemic lasting far longer than we expected, the world is preparing for a deep recession that is predicted to intensify by 2021/22. One of the best ways to prepare yourself financially is by building your credit score. With credit becoming far less accessible and a lot more expensive, banks and lenders will only lend to people with the best credit scores. Building and establishing credit is essential if you want to borrow money. However, it does take time. In this article we will guide you through the fastest ways to build your credit score yourself.

7 Best ways to build your credit fast

Are you looking to take out a mortgage, buy a car, or borrow money, but you can’t because you have a low credit score or don’t have one at all? Read on to find the best tips on how to build your credit fast, so you can start the ball rolling and apply for the credit you need.

1. Improve your credit score by paying your bills on time

Paying your bills on time is a must if you are looking at how to improve your credit score as payment history makes up 35% of your credit score. This applies to loans, credit cards, utility bills, mobile phone services and any other account that requires a monthly payment. No matter what bill it is, making a late or missed payment will get recorded on your credit report and do significant damage.

Utility bills, cell phone bills and many other bills can get your credit score up if you pay them on time. You can get credit for these bills by signing up for Experian Boost. This a free product, where Experian will connect to your bank account to identify your utility and telecom payment history. Experian Boost is one of the fastest ways to improve your credit score with little effort.

2. Fix your credit score by disputing any inaccuracies on your
credit reports

Get in the habit of reviewing your credit reports regularly. You can get your credit report free from all the credit bureaus every 12 months. Analyze your credit report for errors and dispute any incorrect information with the credit reporting agency immediately. Getting all inaccuracies removed from your credit report is the best way to fix your credit.

Note: Don’t just analyze one credit report, make sure to check all your credit reports, because an error filed on one credit report won’t necessarily be filed on all of them. Repair your credit report with all the CRA’s to see the best results.

3. Raise your credit score by becoming an authorized user

One of the best ways to raise your credit score fast is by becoming an authorized user on a card of someone who has an excellent history of paying their bills on time. You can ask a family member if they are willing to add you as an authorized user on his or her card. This will add that card’s payment history to your credit file and raise your credit score instantly. Also, being added as an authorized user can reduce the amount of time it takes to generate a FICO score.

You don’t have to use or even own the card to gain from being an authorized user. Ask the primary cardholder to find out if the card issuer reports authorized user activity to the credit bureaus. That activity usually is reported, but it’s worthwhile to make sure, otherwise, your efforts to raise your credit score may be wasted.

This method of becoming an authorized user comes with some risks, though. Your credit file will reflect how the card is used, even if you’re not using it. If you or the primary cardholder goes into debt or misses payments, it could end up damaging your credit instead of helping to raise it. Only become an authorized user if you and the primary cardholder are both committed to practising smart credit-building habits.

4. Take out a credit builder loan to boost your credit score

A credit builder loan is another excellent way to build and boost your credit score. Smaller institutions like credit unions or community banks offer credit builder loans specifically to help borrowers build up and boost their credit score fast. You borrow a small sum of money, which is put into a savings account and held until the loan is repaid. Every payment you make will get reported to the credit bureaus, so if you make all your payments on time, you will be successfully building up and boosting your credit score.

These loans often have low-interest rates and are accessible to people with low or nonexistent credit. That’s because you are securing the loan with a cash deposit, so it’s not risky for the lender. Credit builder loans aren’t the best solution if you need the money now because you need to pay off the loan before you get access to the funds. However, if you have time and are looking at how to boost your credit score, credit builder loans are a great place to start.

5. Increase your credit score by raising your credit limit and
keeping your credit utilization low.

One of the best ways to increase your credit score fast is by requesting a credit limit increase from your credit card provider and keep your credit utilization below 30%. Your credit utilization ratio is the amount of revolving credit you’re using divided by the total amount of credit you have available. Your credit utilization ratio can significantly impact your credit score. A ratio below 30% shows that you are not dependent on credit and is often considered good by lenders. By increasing your credit limit, you automatically lower your credit utilization ratio, which is a great way to increase your credit score quickly.

Note: The best time to ask your credit provider to increase your available credit is when your balances are low. This shows the lender that you are not a risky borrower.

6. Build your credit with a secured credit card

If you have poor or nonexistent credit, one of the best ways to build credit with a credit card is by getting a secured credit card. This card is backed by a cash deposit you make upfront; the deposit amount is usually the same as your credit limit but can vary between lenders. Just like a regular credit card, you can build credit with a secured card by keeping your balance low or at zero, and by making the repayments on time every month.

Choose a secured card with a low yearly fee and make sure it reports payment data to all three credit reference agencies, Experian, Equifax and TransUnion. Your credit score is built up with your financial history that is recorded in your credit reports. Cards that report to all three agencies allow you to build a more comprehensive credit history.

7. Rebuild your credit by reviewing your financial behaviour

Some financial behaviours can undermine your efforts to rebuild your credit fast, so it’s essential to review your behaviour and learn what to avoid. Here are some common mistakes:

• Not understanding how much you can afford – Make sure that your debt-to-income ratio doesn’t exceed 43%. The debt-to-income ratio is a comparison of your monthly debt obligations and your gross monthly income. People with higher ratios are more likely to struggle with making monthly payments.
• Not having a budget – Having a budget in place is a necessity for all aspects of money management. Knowing how much you’re spending and saving each month can help you make better financial decisions and is a great way to rebuild your credit.
• Not protecting yourself from fraud – Credit card companies have taken measures to reduce fraud, and federal law are also trying to protect consumers from credit fraud. Taking the necessary precautions to protect yourself from fraud can also help you rebuild your credit score.

Why is it so important to build a good credit score?

Your credit score is your financial DNA; it determines your cost of living, your credit accessibility and your money opportunities. Good credit doesn’t just affect getting approved for a credit card, loan or mortgage. But credit also impacts renting an apartment, getting approved for a phone contract, and even goes as far as getting a job. Having a good credit score will also get you the best rates and deals when you borrow credit because you are less risky to the lender.

When you apply for credit, the lender wants to see that you are responsible with your money and that you will pay them back on time. Some employers check credit references too, especially when the job you’re applying for involves handling money or dealing with confidential financial information.

Common Questions