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5 Debt-Free Ways to Boost Your Credit Score

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Pencil erasing debt to illustrate how to boost credit score overnight

It’s the personal finance Catch 22—you need credit to get credit. But what many people don’t realize is that you don’t necessarily need debt to get credit. Or, backing up for a second, you don’t necessarily need to carry debt to improve your credit scores. In fact, if you’re looking for ways to boost your credit score overnight, your best bet involves paying down high balances on revolving lines of credit—like a credit card or home equity line of credit.

Let’s break down debt-free options to boost your credit score quickly and get a good credit score without going into the red.

1. Get a Credit Card

Getting a credit card can be the quickest way to wind up making purchases you can’t actually afford. But, it can also be the best way to achieve a good credit score. That is if you make on-time payments on your credit card as well as any other type of financing you have. Payment history makes up 35% of a credit score.

Most installment loans, like a mortgage, auto loan or student loan, require taking out a lump sum of money and paying it back over a set period of time. But when it comes to revolving loans—and particularly credit cards—there’s no need to carry a balance month-to-month. Instead, qualifying for a credit card with a low credit limit is all you need. Make a few small charges each month to the card and pay your account in full, and on time, every month to begin building credit. There are credit card issuers who grant cards to people with bad credit.

Keeping charges below 10% of your credit card’s limit is good for your credit score as well. If you have a card with a $500 limit, keep your monthly charges below $50 as a good, credit-building strategy. The credit utilization rate accounts for a large percentage of your credit score. It falls into the category of amounts owed which accounts for a staggering 30% of the criteria used to create your FICO scores.

Consider the Petal Visa Credit Card

It requires no credit history for approval. It has no annual fee. And it can help you build credit when you use it responsibly by reporting your activity to all three credit bureaus. You can also enjoy a credit limit from $500 to $10,000 without making a deposit.

2. Opt for a Secured Credit Card

Capital One Secured Mastercard credit card

A secured credit card is one that is backed by an upfront deposit. Traditional credit cards are unsecured and don’t require a deposit.

If you can’t qualify for a traditional, unsecured credit card because you have no credit or have made credit mistakes in the past, consider applying for a secured card instead.

With a secured card, you can make a small deposit—typically a couple hundred dollars—with the credit card issuer and get a card. Your card’s credit line is usually, but not always, your deposit minus any fees charged by the card issuer. Some issuers will give you a credit line larger than your deposit.

To boost your credit, make sure you choose a secured card that reports to each of the three major credit reporting bureaus—Equifax, Experian and TransUnion. Then, make steady on-time payments to your secured card and keep charges below 10% of your credit line. After a year or so of on-time payments, consider asking your credit card issuer for an unsecured credit card to increase your credit score.

One great option for a secured credit card is the Capital One® Secured MasterCard® card. It has no annual fee, reports to all three credit bureaus, and will give you access to a higher credit line for no additional deposit if you make your first five monthly payments on time.

3. Look In to Credit Builder Loans or Accounts

Self Lender Credit Builder Account logo

A credit-builder loan is the installment loan version of a secured credit card. “Borrowers” put a small amount of money—$500 or less—into a savings account at a bank and then make fixed monthly payments each month until they’ve “paid back” the money and have access to the money again. Credit builder loans are designed specifically to help people with poor, no or bad credit show their ability-to-repay, so, yes, the bank should be reporting the payments to the major credit reporting bureaus.

Some banks pay-albeit a very small amount-interest on their credit builder loans or accounts, so you could wind up pocketing a few extra dollars from that deposit while getting your credit in good standing.

One interesting option for a credit builder account is Self Lender. With the Self Lender account, you pick an amount to invest in a CD for 12 or 24 months. You pay a nonrefundable administration fee. You then make a payment each month. The payment pays interest on the account as it would on a loan. You also though earn interest on the account as you would for a CD. The CD earns interest at a lower rate than what you pay for the loan though. Still, you build credit.

4. Become an Authorized User

If you don’t feel ready for your own credit card or simply can’t qualify for one, see if a family member, like a spouse, parent or guardian, will add you as an authorized user to their credit card account. An authorized user can make charges to the account, but they’re not responsible for actually paying them back. That’s the primary cardholder’s responsibility.

Many banks and issuers report their authorized users to the credit bureaus. But again, you’ll want to check with the primary cardholder’s lender ahead of time, so positive information associated with the account can help you build credit. Given you’re not liable for the charges, negative information can be disputed and removed, should it appear on your credit report. Of course, you’ll want to responsibly use a card that your family member or loved one gives you. Alternatively, you don’t use the card at all, because long as the primary cardholder is using the card responsibly, you’ll build credit too.

5. Monitor Your Progress

Track of your credit-building efforts with Credit.com’s free credit score and report card. You get your Experian credit score for free along with a customized plan to help you improve your credit score and build credit. Check your credit regularly to make sure you stay on track and so you can monitor for any discrepancies that may happen along the way. It also helps watch for suspicious activity and even identity theft.

Remember, the key is building a solid payment record is following the 10% rule. Not acquiring new credit card debt until you can do that helps too. Only charge what you can pay off each month and maximize your credit-building efforts by carrying no more debt than 10% of your available credit limit. Also pay your bills on time. And watch your credit score climb.
The credit.com credit score dashboard to boost your credit

Boost Your Credit Score

The lower your credit score is when you’re first starting to rebuild or build your credit, the likelier it is that you can achieve a boost relatively quickly, although not actually overnight. Even the smallest change though when you have a very low credit score can result in a significant increase in your score fairly quickly.

How Long Will It Take to Boost My Score?

Building good credit takes time and patience depending on your overall credit profile. However, six months of on-time payments is usually a good timeframe for getting your foot in the door if your credit was previously nonexistent. If you have high credit card balances on record, you might see a boost in 30 days by paying a big chunk of them down and refraining from making new charges, of course.

It’s also possible to see a boost in 30 to 45 days if your credit is being weighed down by a legitimate error. If the error isn’t legitimate, there are ways to dispute errors and get incorrect items removed from your credit reports. Still, to keep your credit score solid in the long-term, you want to:

  • Make all you payments on time
  • Keep debt levels low in relation to your available credit limit
  • Be careful about incurring too many credit inquiries
  • Add a mix of credit accounts-installment vs. revolving loans, for instance-as you can afford to
  • Have credit and use it wisely for at least five years

This article was last published December 07, 2016, and has since been updated by another author.

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  • Dan

    4 years ago I bought a house and at that time my credit score was something like 750. 3 years ago I paid off and cancelled my credit cards, then I paid off my house. I have never borrowed any money since paying off the house, I currently have no debt of any kind. How would my credit score look today.

    • http://www.credit.com/ Credit.com Credit Experts

      You could check it yourself to see. Here’s how to monitor your credit score for free. It is also possible you have become a “credit ghost” without a score. You can read more about that, plus what to do, here:
      Have You Become a Credit Ghost?

    • mjf

      Look at it, maybe freeze your credit also..you can freeze it..good to keep it above 700 even though your home and cars and depts are all paid for..times and circumstances in life can change rapid fast and its good for emergencys to always have that security to fall back on having good credit..

  • Ketan Patel

    Hi Guys,
    I met a Credit Counsellor, and looking at my credit report, she suggested me to open a Loan account in a Credit Union.
    I have opened a Loan account of $1000, and have deposited $1100 in the savings account, and have setup an autopay for each month.
    My credit card limit is $1000 on a secured credit card on my name and $1500 as a authorized user, I pay every 14 days, and keep my balances really low, and before due date i pay the rest. I dont have any other active debt, other than 3 charged off accounts, that were closed 3 years ago. I pay on time, zero balances, still my score is very slowing growing.
    Question: The bank where i opened this loan account, the lady suggested that, I can open one more loan account, this should double the score that is being reported at the end of the month. Does it work? Having two different loan accounts from same bank, will bump scoring every month? Same Creditor?
    Also, this is a Loan, so my credit balance/limit will be $2000 now when some is pulling my credit, whereas i have a credit limit of $2400 from both the card. Will this start lowering the score, since my debt will grow?
    Please do provide your expert suggestions, i am in process of rebuilding my credit.

    • http://www.Credit.com/ Gerri Detweiler

      A second loan isn’t necessarily going to “double” the score. It may help, since you will have two current, paid on time credit references (rather than just one) but it will take time for that new reference to help your scores. (The fact that it is the same creditor shouldn’t matter if they are reported as separate loans).

      I am not sure what you mean by your debt/limit. Are you talking about the utilization or debt usage ratio? That will be calculated on each account separately as well as with both combined.

      • Ketan Patel

        Thanks Gerri for your guidance. Debt to Limit – I was asking about utilization. I owe one credit card with a limit of $1000 and another one I am an authorized user with a limit of $1500. Both the cards are paid before due date in full, but still utilization is around 17%, I guess when I make some charges after due date and before CC reports on my credit file, some amount is reported by them.

        Now second loan, if I take for $1000 more, does this affect the Credit Usage.
        As of now on Experian I am seeing my Credit Debt is $266, total credit is $2000 (increased credit line of $500 hasn’t been updated yet), but its show CREDIT USAGE 14%. Does this will go up, since next month, I will have $2500 in credit limit plus now I will have 2 loan accounts of $2000 total, each of $1000.

        Thanks,

        Ketan

        • http://www.Credit.com/ Gerri Detweiler

          17% or 14% isn’t terrible by any means. I am having a bit of trouble following your comment, but your new credit limit will increase the aggregate credit limits and if the balance is small can improve your debt usage overall, though scores often look at it individually (per account) as well. Perhaps this article will help: Tips for Improving Your Credit: Your Amount of Debt


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