How To Build Your Credit Fast The Best Way For Beginners

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How To Build Your Credit Fast The Best Way For Beginners

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1. Pay credit card balances strategically
The portion of your credit limits you're using at any given time is called your credit utilization. A good guideline: Use less than 30% of your limit on any card, and lower is better. The highest scorers use less than 7%. (You can track your credit utilization on each card and overall by viewing your credit score profile with NerdWallet.)

You want to make sure your balance is low when the card issuer reports it to the credit bureaus, because that's what is used in calculating your score. A simple way to do that is to pay down the balance before the billing cycle ends or to pay several times throughout the month to always keep your balance low.

2. Ask for higher credit limits
When your credit limit goes up and your balance stays the same, it instantly lowers your overall credit utilization, which can improve your credit. If your income has gone up or you've added more years of positive credit experience, you have a decent shot at getting a higher limit.

3. Become an authorized user
If a relative or friend has a credit card account with a high credit limit and a good history of on-time payments, ask to be added as an authorized user. That adds the account to your credit reports, so its credit limit can help your utilization. Also called "credit piggybacking," authorized user status allows you to benefit from the primary user's positive payment history. The account holder doesn’t have to let you use the card — or even give you the account number — for your credit to improve.

Make sure the account reports to all three major credit bureaus (Equifax, Experian and TransUnion) to get the best effect; most credit cards do.

4. Pay bills on time
No strategy to improve your credit will be effective if you pay late. Worse, late payments can stay on your credit reports for 7½ years.

If you miss a payment by 30 days or more, call the creditor immediately. Pay up as soon as you can and ask if the creditor will consider no longer reporting the missed payment to the credit bureaus. Even if the creditor won’t do that, it’s worth getting current on the account ASAP. Every month an account is marked delinquent hurts your score.

5. Use a secured credit card
Another way to build or rebuild your credit is with a secured credit card. This type of card is backed by a cash deposit; you pay it upfront and the deposit amount is usually the same as your credit limit. You use it like a normal credit card, and your on-time payments help build your credit.

6. Get credit for rent and utility payments
Rent reporting services can add your on-time rent payments to your credit reports. Rent payments are not considered by every scoring model — VantageScores include them but FICO 8 does not, for example. Even so, if a would-be creditor looks at your reports, rent records will be there, and a long record of consistent payments can only help.

Experian Boost also can help, but in a more limited way. You link bank accounts to the free Boost service, which then scans for payments to streaming services and phone and utility bills. You choose which payments you want added to your Experian credit report. If a creditor pulls your FICO 8 using Experian data, you get the benefit of that additional payment history.