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Originally Published: Dec 15, 2021
Originally Published: Dec 15, 2021 Last Updated: Mar 17, 2022 13 min read
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Jared Oriel for Money

Building credit requires patience. Yet, with the right financial products and smart credit use, you can build a better score much quicker than you think.

Read our guide below on how to build credit fast and start your journey to better financial health.

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How Do You Build Credit?

One of the fastest ways to build credit is having active lines of credit that showcase responsible use. This applies if you need credit repair or if you are building your credit from scratch.

Building better credit can take as little as six months of on-time payments on a credit account. You might not have the best credit right off the bat, but you can work your way up to it by following these steps:

1. Request and analyze your free annual credit report

A credit report is a collection of data points about your financial habits that make up the building blocks of your credit score. These include credit limits, account balances, payment history, bankruptcies, collections and credit inquiries.

Consumers can request one free credit report per year from each reporting agency. Find yours with annualcreditreport.com.

Once you have the report, sift through it carefully. The goal is to find anything that may be affecting your score, whether it’s high credit utilization, frequent hard inquiries, a thin file, missed payments or clerical errors. Our guide on how to read a credit report may be useful in this process.

Dispute credit report errors

Consumers can dispute credit report errors either with the lending institution or directly with the three major credit bureaus: Experian, TransUnion and Equifax. The process is straightforward; write a letter that clearly communicates the error, and provide evidence to back up your claim. You’ll need to contact each credit bureau to make sure the error is removed from all reports.

While you can’t get factual information removed from the report (like a history of missed payments), removing errors is worth the effort if it improves your score.

Common credit reporting errors include:

  • Incorrect personal information
  • Duplicated debt
  • Mixed files – displaying someone else’s accounts
  • Inaccurate account balance and credit limits
  • Negative items past the 7-year mark

Hire a credit repair company

Credit repair companies charge a monthly fee to draft dispute letters, clean up your report and handle creditor negotiations. These services work best for consumers with multiple errors who don’t have the time to file disputes with each agency.

Credit repair companies can’t charge you upfront for services not rendered and most importantly, they can’t remove accurate items from your report. Any such promise is a red flag.

Our reviews for the best credit repair companies will help you get a head start, but before making a final decision, read the credit repair guide section. There, we get you up to speed on what to expect from a credit repair company and how to pick the right one.

2. Pay your bills on time

Don’t miss payments on any existing credit lines, such as student loans, credit cards or auto loans. Payment history is the single most influential category for your FICO and VantageScore — the main credit scoring models used by lending institutions. Each late payment not only drags down your score, but the negative mark stays on the report for seven years.

Alternative credit history — rent and utility bills — isn’t reported to credit bureaus, unless the account is delinquent and sent to a collection agency. Nonetheless, a history of on-time rent and utility payments can work in favor of individuals with no credit.

Experian Boost and UltraFICO are two fairly new tools that incorporate alternative credit history. While this data isn’t included in typical credit scoring calculations, it's another way for a prospective lender to assess your creditworthiness.

  • Experian Boost captures and factors positive payment activity (like on-time cell phone, utility and rent payments) into your record. On average, Experian says users see a 13-point increase in their credit scores.
  • UltraFICO includes bank account activity from a user’s checking, money market or savings accounts to give lenders a more in-depth look at borrowers with a “thin file.”

Lastly, you can ask your landlord to report your payments to the credit bureaus. Know that this can backfire if your payment history is negative, as a landlord doesn't need the tenant’s consent to report payment activity, whether negative or positive.

To make the best of rent reporting:

  • Keep evidence of payments
  • Don’t miss any payments
  • Ask that they report to more than one bureau
  • Check your landlord’s report regularly to ensure it accurately reflects your payment history

3. Pay off your debt

If you have outstanding installment or credit card debt, focus exclusively on reducing your debt burden before moving on to other items on this list.

Some debt-payment strategies worth mentioning are:

  • Pay more than the minimum, as your budget allows
  • Set up automatic payments and bill reminders to prevent any missed payments
  • Use the “avalanche method” to tackle balances with the highest interest rates first
  • Use the “snowball method” to pay off the smallest loans first, and gradually increase payments towards larger loans
  • Apply for a debt consolidation loan to group all your debt payments into a single loan with fixed interest rates and monthly payments

Note that paying off your credit card debt is a great way to build your credit, but experts advise against canceling or closing a credit card account as it may negatively affect your credit history and credit utilization.

4. Become an authorized credit card user

Becoming an authorized user on a credit card account can boost your own score if it's done with someone with an established history of good credit.

Parents often help their children build credit this way, by adding them to a credit card for use while in college, for example. Unlike having a co-signer or a joint account, the primary cardholder still retains the right to remove the authorized user from the card.

Becoming an authorized user is a serious question of trust. If an authorized user runs up the credit card balance, the primary cardholder will be stuck paying it. Conversely, if the primary cardholder falls behind on their credit card payments or maxes out the card, the credit score of the authorized user could be hurt.

Pros
  • Access a credit card in your name
  • Build credit with little to no credit history
  • Good learning tool for teenagers just starting out
  • The primary cardholder's payment history and credit length count towards your score
Cons
  • The credit card company may charge a fee
  • The primary cardholder is liable for all debt
  • The primary cardholder retains the right to remove you
  • Requires a trustworthy friend or family member
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5. Get a secured credit card

If you can’t become an authorized credit card user, consider a secured credit card. These have very high approval rates, with the possible exception of people who are within a year of a bankruptcy filing.

Secured credit cards require a refundable deposit upfront, which can cost anywhere between $50 and $200. Once you deposit the amount determined by the lending institution, you’ll get immediate access to a secured line of credit.

The approved credit limit is equal to the security deposit, and it’s up to you to spend within that limit and make on-time monthly payments. The card issuer then reports those payments to the credit bureaus.

Lenders may allow you to transition to an unsecured credit card after a set period of time, provided you don’t make any late payments. If you close the account (paid in full) or transition to an unsecured card, the deposit is then refunded.

To make the best of a secured credit card:

  • Avoid issuers that charge application, monthly and processing fees
  • Read the credit card issuer’s disclaimers and fine print before signing up
  • Limit your spending to a few monthly purchases you can afford
  • Pay the balance in full each billing cycle
  • Don’t max out your credit limit
  • Don’t miss any payments
  • Make sure lenders are reporting your payment activity
Pros
  • High approval rates
  • Refundable deposit
  • The credit line is in your name
  • Possibility to upgrade to an unsecured credit card
  • Lenders report your activity to the credit bureaus
Cons
  • Requires upfront payment
  • May charge high annual fees
  • Fees come out of your deposit, reducing your available credit
  • Low credit limit
  • No perks or rewards

6. Maintain good credit utilization

Once you have an active credit card, it’s tempting to use it as much as the credit limit allows, but this will actually steer you away from a good credit score. There is such a thing as good and bad credit utilization, even if you have an impeccable payment history. In fact, credit utilization is the second most important credit score factor, after payment history.

A credit utilization rate divides current revolving credit debt by your maximum credit limit. The resulting number, expressed as a percentage, reflects your credit utilization ratio, namely how much credit you are using relative to how much credit you have.

Imagine you have a credit card with a cap of $8,950, and the running balance stands at $2,332. $2,332 divided by $8,950 is 0.26, which means that your credit utilization rate is 26%.

Good credit utilization is summed up in one rule: Don’t use more than 30% of your available credit. If a secured credit card has a $300 limit, this means the running balance shouldn’t exceed $90 at any given time.

Anything higher than 30% is considered bad utilization – your credit score won’t grow and lenders may flag you as risky, due to excessive credit use. If reducing your credit usage is not an option, consider asking for a higher credit limit to balance out the utilization ratio.

7. Apply for a credit-builder loan

A credit-builder loan is an installment loan designed to help borrowers build credit, with a relatively short repayment term, fixed interest rates and monthly payments. Terms range from 6 -24 months and loan amounts rarely exceed $1,000.

Typically available through credit unions, credit-builder loans work differently than conventional loans in that,

  • Borrowers don’t have immediate access to the money
  • Funds accrue in a savings account until the end of the loan period
  • Payments are reported to the credit bureaus as you make them
  • Credit unions release the money to you when repayment is complete

According to a recent report by the Consumer Financial Protection Bureau (CFPB), debt-free participants successfully used credit-builder loans to establish a good credit score. A diverse credit file including installment loans and revolving credit makes you more creditworthy in the eyes of lenders. However, the risks of incurring long-term debt can’t be overstated, especially if you’re still in financial recovery.

That same study reported that borrowers with existing debt did not benefit from credit-builder loans at all. On the contrary, they experienced increased debt burden and difficulty keeping up with existing debt payments. This defeats the entire purpose of the loan, which is to improve credit scores.

People who are trying to repair or build their credit are best served by a secured credit card or by becoming an authorized user. Consider a credit-builder loan as a last resort and only if you’re 100% sure you can pay it back in full.

Pros
  • Builds installment credit
  • Reports loan payments to credit bureaus
  • Does not require upfront payment
  • Loan amounts do not exceed $1,000
  • Short loan term
  • Some don't require credit checks
Cons
  • Lending institution withholds funds until repayment period ends
  • Repayment includes added interest rates
  • Late payment fees apply
  • Increases long-term debt burden
  • Not for people with existing debt

How To Build Credit Fast FAQ

What is a good credit score?

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The criteria for a "good credit score" varies by lender and credit scoring models. A "good" or "very good" score generally falls between 600 and 780. 800 or higher is considered excellent credit, while anything below 580 is a "poor" score.

How to build credit

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Building credit requires time and diligence, especially if you're trying to repair damaged credit. The first step is to request and analyze your credit report. After that, there are several options to consider, depending on your financial situation.

How to check my credit score

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Experian and Discover provide free access to your FICO score. Other websites, like Credit Karma, also display your score using data from one or more credit reporting agencies. It's normal for credit scores to vary slightly, depending on the credit reporting agencies and the credit scoring models they use. Check the actual report to make sure everything is correct.

How many credit cards should I have?

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People with good to excellent credit scores tend to keep three open credit card accounts. That being said, low credit utilization and solid payment history are far more important than the number of credit cards you have. Establish good payment history and low credit utilization before adding new credit lines.

Summary of Money’s Guide on How To Build Credit Fast