Credit is elusive for a lot of people, but when you start understanding the criteria used to calculate credit scores and how credit bureaus work, it starts to become clearer.
Building your credit can be done rather easily, even if it has been severely damaged. And, if you’ve never used your credit and have a clean slate, then you have to know what to do and avoid so you can keep your record clean.
Here Are Prime Tips To Help You For Building Your Credit In Record Speed:
Let’s take a look at some of the fastest ways to build your credit.
1. Correct Errors On Your Credit Reports
This is perhaps the single fastest way to get a boost on your credit score. It doesn’t happen all the time, but there are many cases where credit reporting agencies or creditors will make mistakes.
These mistakes could have been on your credit report for years without you knowing. This is why you should make it a habit to order a copy of your credit report from one of the three main reporting agencies (TransUnion, Equifax, and Experian) every year.
Every American is entitled to one free copy per year of their report, so take advantage of that. Check the report in detail and see if you can spot anything irregular, like accounts that you’ve closed or payments that weren’t reported. Then follow each bureau’s procedure to get the false entries removed.
2. Be Strategic With Your Credit Card Payments
One thing that a lot of people don’t understand is how much of an impact the balance on their credit cards can have on credit scores. If you didn’t know already, credit agencies give a lot of weight to having more credit than you need.
The credit utilization ratio is a calculation of how much credit you’re using versus how much you have available. The lower the ratio, the better it is for you.
It’s suggested that you keep your credit utilization ratio under 30%, but the best performers keep their balance under 7%. It’s also a good idea to make your payments in advance.
If you want to know ‘what happens if I pay my credit card early?’, you should check out this article by Tally. You’ll learn how paying your credit card balance before the due date will improve your credit score and some explanations of how credit scores work in the first place. They also show some of the benefits of paying early beyond improving your score.
Paying early and often throughout the month will keep your balance as low as possible while making your accounts easier to manage. So, find a way to pay as early as possible and automate payments to make sure you never miss them.
3. Get A Secured Credit Card
This tip is for people who have had credit issues in the past and can’t apply for a card, or people who are just getting started and don’t have the income needed to apply for a traditional credit card.
Secured credit cards are one of the best credit-building instruments anyone can use. Secured credit cards allow you to put an amount of cash as collateral, which will be used as your limit. This is why it’s virtually impossible to not get accepted for these cards.
You have to make sure, however, that the activity on the card will be reported to credit bureaus or you’ll not receive any benefits. This is something you can easily find out by asking the card issuer and looking over the contract. Also, note that you can usually increase the limit on the card after a while or turn it into a regular credit card depending on how you used it and the issuer.
Related: Earn air miles with your credit card
4. Open Multiple Accounts
This one’s a bit trickier, but it is one of the most efficient methods that you can use. You should try to apply for as many accounts as you reasonably can and consider applying for another credit card but only if you’re 100% sure that you’ll get accepted. You also have to make sure that you can handle those accounts and that you treat them like gold.
Getting financing on a purchase and paying it on time instead of buying it in cash could help boost your credit score by showing financial activity and responsibility. Getting an additional credit card and not using it will instantly lower your credit utilization ratio.
Be careful with the pace at which you apply for credit, however, as too many inquiries on your record will be interpreted as a sign of financial distress and could affect your score negatively. As a rule, it’s always better to apply for one credit card at a time and wait 90 days between applications.
These are all things that you could do right now to boost your credit score fast. Use as many methods as you can realistically and reasonably use, and put systems in place to make sure that you always fulfill your financial obligations.