Building Your Credit
Whether you’re building credit for the first time or want to fix mistakes of the past, we’ve got tools and resources to help you do it quickly and efficiently. You don’t have to do it yourself. Credit.com is here to help.
Before we get started, we need to clarify one thing: Building your credit takes time, and there is no magic fix for bad credit. In order to prove your creditworthiness to potential creditors, you need to build a better credit history, and that takes time. Over time, implementing different credit-building methods can work together to create a stronger credit profile.
So, let’s break down how to build your credit and what you need to do to establish a strong credit history so you can start your credit building journey right.
How Do I Start Building Credit?
First, it’s important to know what exactly makes up a credit score so you can identify where you need to improve. Your score is affected by five factors:
- Payment history—35%
- Amount of debt—30%
- Credit age—15%
- Account mix—10%
- Credit inquiries—10%
With a better understanding of the makeup of your credit score, what are some ways you can build good credit? First, it’s important to establish a good baseline of credit history for 6 to 12 months.
This comes down to responsibly managing your entire credit profile—from credit accounts to consistent credit monitoring—to see how you’re doing and what needs to be better. Here’s how you can build credit fast.
Make On-Time Payments
Seems pretty standard, but paying your credit card accounts on time, every time, is one of the best ways to build credit. Paying on time will show responsible usage and can have a positive impact on your credit history. A single late payment—especially one more than 60 days late—can have a devastating effect on your credit score. Multiple late payments begin to look like a pattern of risk for credit lenders, making them unlikely to extend you additional credit. Wanton usage without paying it back on time also increases your credit utilization, which adversely affects your credit score.
Lower Your Credit Utilization Ratio
As noted above, a high credit utilization ratio will negatively affect your credit. This ratio is what percentage of your credit limit you’re using. It’s recommended to keep it below 30%. If you keep your credit usage below this percentage, and make payments to keep it that way over time, you can help build your credit and show you can manage credit responsibly.
Limit Credit Inquiries
To build credit, too many hard inquiries is something to avoid. Every time you apply for a new credit card or loan, it constitutes a ‘hard inquiry’ on your credit report. These inquiries can temporarily cause your credit score to drop. Too many of these over a short period of time can negatively affect your score and it shows you as a riskier, more irresponsible person in the eyes of lenders. To make sure this doesn’t happen, don’t apply for multiple credit cards or loans at the same time, stay on top of payments, and apply for credit only when you need it.
I Need More Help Building Credit, What Do I Do?
If you’re looking for tools and resources to help build your credit, you’re in luck. Here at Credit.com, we have the tools you need to build your credit and increase your creditworthiness to lenders. Need a helping hand when building credit, try these tools.
Get Your Credit Report Card
Do you want to know how healthy your credit score is? Then, credit.com can help. Get your free credit report card to show where your credit stands, and what you need to improve. With an Experian VantageScore 3.0 updated every 14 days, you’ll have an up to date credit score and credit report card to show you which factors are impacting your credit the most. And you can better keep track of how well you’re building your credit!
With a better grasp of your credit scores, you can know exactly where you stand in your credit building, and get recommendations on what to do next. Here’s some ideas of how you can start building a credit profile.
Get a Secured Credit Card
A secured credit card is a great way to build your credit, especially if you’re starting from scratch. This is because you have a much higher chance of obtaining a secured credit card than other cards. So, if you’re unable to qualify for a traditional unsecured credit card, this is a good place to start building up your credit history.
You can open a secured card with a security deposit which typically becomes your credit limit (For example; a $500 deposit equals a $500 line of credit) and they often don’t require a credit check to apply. But they can still help build your credit as they report to the credit bureaus. And, responsible usage can sometimes lead to credit limit increases and even unsecured credit card offers from the issuer. When choosing the best secured credit card for you, look for factors like APR and annual fees, as these can vary by card. Check out these options:
Get a Credit Builder Loan
A credit builder loan is exactly what it sounds like; it’s designed to help you build credit. U These loans are typically for a small amount, like $1,000, sit in a CD (certificate of deposit), and you don’t receive proceeds from the loan until the collateral amount is paid off. It’s one way to build credit and gain some savings at the same time. Look for a credit builder loan that reports payments to one if not all credit bureaus.
Sign up for ExtraCredit®
ExtraCredit by Credit.com is the most comprehensive credit monitoring solution out there. With the Build It feature, you can report rent and utilities as new tradelines to your credit report, which can help build your credit. You can get credit for always paying your bills on time, and get credit where it’s due.
And if you need to keep track of where your credit stands and how it’s grown, ExtraCredit can do that too, with Track It. You can get more than just one credit score, like you get with the free services. Unlock 28 FICO® scores, and see what lenders see before you apply for loans or credit cards. That’s not all. You can also see reports from all three credit bureaus, and get advanced credit monitoring and alerts, so you know how you’re building credit, what you’ve gained and what you might be missing.
Become an Authorized User
Don’t Wait to Build Your Credit
Credit.com is here to give you the tools and resources you need to start building your credit the right way. Establish your baseline, spend responsibly, and you can see your credit score rise over time. You don’t have to do it alone, let us help guide you along the path to financial wellness.
