30% of Americans have poor or bad credit and an additional 20% have no credit at all. This means roughly half of all Americans could benefit from a credit-building strategy.
And credit score is everything. With bad credit or no credit, you could struggle to find a landlord, car insurance, and more. And of course, you’ll also have difficulty landing a loan with an affordable interest rate.
Whether you have no credit or bad credit, you do have options. Want to know how to build credit fast? It’s easier than you might think.
Here are six simple ways to build credit fast, no matter your current credit score.
1. How to Build Credit Fast? Try a Credit Builder Loan
A credit builder loan exists for the sole purpose of building credit. It differs from a personal loan since you don’t borrow money. Also, it doesn’t require a credit check.
But if it’s not a real “loan”, how does a credit builder loan work? Once approved, you’ll start making monthly payments. Your lender puts these installments into a savings account.
You’ll get access to this savings account once you’ve finished paying off your theoretical loan. In actuality, a credit builder loan is just a savings plan. But that doesn’t matter to the credit bureau.
Your lender will inform them of your monthly payments as if it were a real loan, which will boost your credit.
2. Apply for a Secured Personal Loan or Credit Card
You might wonder how to get credit when you have bad credit or no credit. It could seem downright impossible. But the reality is you need to apply for the right type of loan.
Even with bad credit, it’s easy to land a secured loan. A lender is hesitant to offer a loan to someone with bad credit since it seems unlikely they’ll be able to pay it off. But with a secured loan, you offer collateral, which means the lender can still recoup their losses even if you default.
A secured personal loan may require you to use your car or house as collateral.
The more lenient option is a secured credit card. Generally, you make a security deposit upfront. You won’t get the deposit back if you default.
Secured loans can be stressful since your possessions are on the line. Thankfully, bad credit personal loans are available when you’re in need. These will all help you build credit, so long as you handle the loan responsibly.
3. Get a Co-Signer
Although you can’t land an unsecured loan yourself, a lender will be happy to approve you with a co-signer.
A co-signer shares responsibility for paying off a loan. So long as you make timely monthly payments, you’ll both build your credit. This is a good option when you want to avoid taking out a secured loan with a bad interest rate.
You can also attach yourself to an established line of credit.
This is the case when you become an authorized user on someone’s credit card. Since you’re included in this line of credit, it’ll affect your credit score.
You don’t even need to use the credit line. You could become an authorized user on a family member’s card — or several. So long as the owner of the credit card is responsible, it will improve your credit score.
4. Turn Monthly Bills Into Credit
Your monthly bills could affect your credit score, depending on how you pay them. For example, some rent payment services will pass the information along to the credit bureaus. Unfortunately, this service tends to entail an additional fee.
It’s also possible to have utility payments appear on your credit report if you have the right provider. Contact your landlord and utility providers to see if they use a service that offers this option.
You should not rely on this tactic alone since it has a small impact compared to loans and credit cards. But using this option alongside others could help you build credit faster.
5. Always Pay on Time
So, you’ve taken out a loan or a credit line. That’s half the battle.
The fastest way to build credit is to make your monthly payments on time. Failing to do so will result in dings to your credit report, which will only make things worse.
Thankfully, you do have some wiggle room. Most lenders won’t report a late payment until thirty days have passed. As long as you pay before this date, you’ll only have to deal with late fees.
6. Check Your Credit Reports
Believe it or not, there’s a way to boost credit score overnight.
Sometimes errors occur on your credit report. These are almost never in your favor. You could be penalized for a missed payment you aren’t responsible for.
Once a year, you’re entitled to a free credit report. It’s a good idea to check the report for signs of identity theft or credit mishaps. File a dispute if you detect any errors.
If the credit bureau cannot provide evidence that the payment information is accurate, they’ll remove it from the records. Once the data is removed, your credit score will rise.
Your Credit Score Is Everything
Now that you know how to build credit fast, don’t sit idly by and leave your credit score in an awful state. With the help of a few specialized loans and punctual monthly payments, you’ll boost your credit score in short order. In addition to lower interest rates, you’ll enjoy better landlords and credit score offers.
Start repairing your credit score by first looking at your credit reports and credit score. Once you know what you’re dealing with, it’s time to take out some responsible loans. You’ll be able to measure your progress once you get your next annual credit report.
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