Kt bear
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What is the fastest way to build credit?

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Answers (1)

Answers (1)

Hi Kt bear,

 

Thank you for your excellent question. The answer is somewhat dependent upon whether you are looking to build credit for the first time, continue building on what has already been established, or attempting to rebuild damaged credit. I will break the answer down based on these three scenarios. I would also caveat that "fast" and "build credit" do not always go together. It can take some time, and in the case of bad credit history, quite a bit of discipline and patience. 

 

If you prefer a visual to all the text below, check out these two infographics:

5 Tips to Build Credit

Get Your Credit Back on Track

 

New to Credit 

  • Look for opportunities to begin establishing credit. Examples could include a secured credit card, secured loan, retail store credit card (sometimes easier to obtain, but be careful, they often have high interest rates), or being added as an authorized user to another family member's credit card.
  • Understand the factors that play into your credit score. The top two - always paying bills on time and maintaining low balances relative to the amount of credit available (preferably paying off balances in full each month) - account for 65% of your overall credit score, and thus you really do not want to mess up on these two. The remaining three factors are, length of credit history (takes time to build), types of credit (credit card, auto loan, mortgage, etc.), and new credit (don't rush out and apply for several things at once; it may hurt your score).
  • Stick to a budget to avoid overspending and accruing more debt than you can handle.
  • Obtain and review a copy of your credit report at least once each year, to ensure it is accurate and so you'll know what is on your report. 
  • Avoid some of the common mistakes: maxing out credit limits, opening too many accounts in a short period of time, closing credit accounts without understanding the impact, and cosigning for someone else.

Maintaining Good Credit

 

In addition to the items above, generally consider:

  • Keeping older accounts open.
  • Continuing to use credit wisely by only borrowing when necessary and paying off credit card balances in full each billing cycle.
  • Keeping accounts in good standing by always making payments on-time.

Rebuilding Credit

 

In addition to the items above:

  • Stop adding to your debt. Put credit cards aside until issues have been corrected.
  • Create a debt repayment plan to begin paying down any existing debts as quickly and efficiently as possible. 
  • If you are behind or need additional help, contact your creditors directly to negotiate a repayment plan or speak with a reputable, non-profit credit counseling agency, such as one through the NFCC.
  • If you do not currently have any open credit accounts, look for opportunities to begin reestablishing credit once your situation is under control. See bullet one under New to Credit. 

Thanks again for reaching out, and please let us know if you have any additional questions.

Mikel