Often people go on the internet searching “how to build credit faster” when they are either planning to take out an auto loan, credit card or mortgage.
Whatever the case may be, the idea of improving your credit score overnight is not attainable. Having bad credit scores or low credit comes with some extra expenses. For example, you will get charged higher interest rates when you apply for either a credit card, mortgage, and auto loan.
Additionally, most times you might get a harsher outcome by being denied when you apply for a loan.
Assuming your credit score is lower than you’d like, there may be ways to improve on it.
What Is A Good Credit Score?
A good credit score is between a FICO score of 670- 739, whereas an exceptional score is above 800.
What is VantageScore?
The VantageScore model uses a range between 300 and 850. A good VantageScore is between 660-780, while an exceptional score is above 780.
Does Credit Score Matter?
Your credit score is a decision-making tool for the lander. It helps the lender anticipate how likely you are to repay your loan on time.
Possessing a good credit score is essential because it helps determine whether you will qualify for a load.
Also, depending on the interest rate of the loan you are eligible for, it could mean increased savings.
Whenever you set a financial goal like becoming a homeowner, your credit score becomes part of the financial picture.
What Are The Factors That Affect My Credit Score?
Several factors affect the impact of your credit score depending on the model used. A credit score is affected by elements in your credit report, such as:
- Type, number and age of credit accounts
- Total debt
- How many credit cards you have recently opened
- The number of inquiries for your credit report
Disclaimer: This list is not exhaustive.
Fico Score Factors
- Most considerable: payment history on credit cards and loans
- Highly significant: Total debts and amounts owed
- Moderately considerable: Length of credit history
- Less substantial: New credits
- Most considerable: Payment history
- Highly significant: Age and type of credit, percent of credit history
- Moderately significant: Debt and total balance
- Less significant: Inquiries, recent credit behaviour and available credit
HOW CAN I BUILD MY CREDIT FASTER?
First, you begin by checking your credit score online. When you get your credit report, you will find the factors affecting your credit the most.
These factors will help you understand the changes you can make to improve your credit score.
Of course, certain credit score factors are more influential than others. For example, credit utilization ratio and payment history represent up to 70% of a credit score, which means, they are influential.
Focusing on the following will help you build your credit faster within a reasonable time.
Pay Your Bills On Time
Prompt bill payment to a large extent improves your credit score. Paying your bills late can negatively affect your credit score. Surprisingly, early bill payment makes up 35 per cent of your credit score.
These bills are not limited to credit cards or any loans you may have but also includes your rent, utilities, phone bill, and so on. Assuming you are late on your bills, endeavour to bring it currently as soon as possible.
Also, late payment appears as negative information on your credit report for seven years. However, their impact on your credit report declines overtime.
Build Your Credit Faster By Boosting Your FICO Score Instantly
Assuming you have been paying your utility bills on time, this can help in building your credit score. You can factor in all those payments using a free product called Experian Boost.
Using Experian Boost, consumers can allow Experian access to their bank accounts to identify utility and telecom payment history.
Once a consumer verifies the data and confirms they want it included in their Experian credit file, an updated FICO Score will be issued immediately.
Endeavour to check your credit report regularly on all the three major bureaus for any inaccuracies. Assuming you find an error on your credit report, dispute it and have it corrected.
Dispute Any Inaccuracies On Your Credit Report
Monitoring your credit card can also help in spotting irregularities sooner.
Utilize The Right Amount of Credit
Your credit utilization ratio makes up 30 % of your credit score; it is right behind your payment history.
Your credit utilization refers to the amount of credit you are using versus your limit. For example, if your credit card has a limit of $2000 and you have used up $360, your utilization is 18%.
The goal is to stay below 20%, but the lower, the better. To achieve a low credit utilization rate, keep your credit card bills low and pay your bills before their statement due date.
Paying a credit card after its due date can result in late fees, and also can result in an increased interest rate depending on the card.
Stop Applying for So Many New Credit Cards, Resulting in Multiple Inquiries.
When you apply for credit, it creates a hard inquiry on your credit report. Too many hard inquiries can affect your credit score negatively. Hard inquiries stay on your credit statement for two years.
Never Close Unused Credit Cards
As long your unused credit cards is not costing you money, is a smart strategy to build your credit faster, because closing the account may increase your credit utilization ration.
Using Secured Credit Cards.
A secured credit card utilizes money you place in a security deposit as collateral against charges you make. If you are an immigrant or have poor credit, this might come in handy.
A secured credit card used responsibly will also help in building your credit card. Also, your secured credit card and be converted to an unsecured credit card. Accordingly, your initial security deposit issued back to you.
How Soon Can I Rebuild My Credit Score?
Suppose you have negative information on your credit reports, such as too many inquiries, late payments or a public record (e.g., bankruptcy), you will have to wait. In this case, time is your ally in improving your credit scores.
The period it takes to rebuild your credit score after a negative change depends on the reason behind the change.
Negative elements such as a delinquent account or collections, hard inquiries will continue to affect your credit score for some time.
- Delinquencies stay on your credit statement for seven years
- Inquiries remain on your credit statement for two years.
- Some public records stay on your credit report for seven years, while bankruptcies may remain for ten years.
Improving your credit score takes a while. Start rebuilding your credit by checking your credit score online, review the factors affecting your credit score negatively and start bettering those issues.