How to Build Credit Fast
Pay rent on time., Obtain a credit-builder loan., Apply for low balance credit card., Use store credit for large purchases., Give lenders incentive to extend credit.
Step-by-Step Guide
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Step 1: Pay rent on time.
A lot of people who have little in the way of traditional credit do rent a home or an apartment and pay rent on time.
Most renters don’t get credit for their rental payments on their credit report, but that doesn’t have to be the case.
There are several services which (for a fee) will report your rental payments to one or more of the major credit bureaus, and tell you which credit cards and lenders will take your rental payments into account.There are quite a few rental reporting services, all coming in at varying price points.
One of the best is RentTrack, as they report to all three credit bureaus and are priced very modestly. -
Step 2: Obtain a credit-builder loan.
The term “credit-builder loan” is somewhat of a misnomer.
In reality, it isn’t much like a loan at all.
While you might apply for a credit builder loan like any other type of loan, the bank doesn’t give you the money it lends.
Instead, it deposits the entire amount in a savings account.
You make monthly payments on the loan, and when it’s completely paid off, they release the funds to you.Credit-builder loans have their good points and bad points.
The advantage of a credit builder loan is that it does usually improve your score—by about 30-40 points.
The disadvantage is the interest; you still pay interest on the loan.
So it’s less like a loan than it is a subscription service to improve your credit score. , “Starter” credit cards are low-balance credit cards with high interest rates and often an annual fee.
They are offered to people with no credit history to help them start building their credit score.
They should be used for small purchases.
Try to pay off the full balance every month to start building good credit., If you are just moving out on your own for the first time, you may need many expensive items like furniture, appliances, or even a car.
These can be difficult to purchase without any credit.
The store or dealer may offer financing options, including store credit.
Many of these may be interest free for a certain period.
Store credit cards often offer discounts on their goods.
While they have high interest rates, they are often available to people with no or low credit scores.
If you need appliances or furniture, you may want to open a card with a store.If you need a vehicle, you can use dealer financing to purchase or lease one.
Remember to choose a car within your budget.
Do not buy a car unless you absolutely need one to get to work or school. , Many lenders may not be eager to extend credit to someone with no payment history.
If they are unwilling to give you a low balance card or a decent loan, you might try to convince them by lowering their risk.
There are two primary ways of doing this.
You can get a co-signer for your loan or you can sign-up for a secured credit card.
Finding a co-signer is one of the most effective ways of building credit when you have none.
A co-signer agrees to make payments on the debt in case you default.
They assume responsibility, and it is their creditworthiness dictating the terms of the loan.Secured credit cards are like credit-building loans in that they’re not really credit—they are subscription services that improve your credit score.
The subscription costs come in the form of interest and other fees. -
Step 3: Apply for low balance credit card.
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Step 4: Use store credit for large purchases.
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Step 5: Give lenders incentive to extend credit.
Detailed Guide
A lot of people who have little in the way of traditional credit do rent a home or an apartment and pay rent on time.
Most renters don’t get credit for their rental payments on their credit report, but that doesn’t have to be the case.
There are several services which (for a fee) will report your rental payments to one or more of the major credit bureaus, and tell you which credit cards and lenders will take your rental payments into account.There are quite a few rental reporting services, all coming in at varying price points.
One of the best is RentTrack, as they report to all three credit bureaus and are priced very modestly.
The term “credit-builder loan” is somewhat of a misnomer.
In reality, it isn’t much like a loan at all.
While you might apply for a credit builder loan like any other type of loan, the bank doesn’t give you the money it lends.
Instead, it deposits the entire amount in a savings account.
You make monthly payments on the loan, and when it’s completely paid off, they release the funds to you.Credit-builder loans have their good points and bad points.
The advantage of a credit builder loan is that it does usually improve your score—by about 30-40 points.
The disadvantage is the interest; you still pay interest on the loan.
So it’s less like a loan than it is a subscription service to improve your credit score. , “Starter” credit cards are low-balance credit cards with high interest rates and often an annual fee.
They are offered to people with no credit history to help them start building their credit score.
They should be used for small purchases.
Try to pay off the full balance every month to start building good credit., If you are just moving out on your own for the first time, you may need many expensive items like furniture, appliances, or even a car.
These can be difficult to purchase without any credit.
The store or dealer may offer financing options, including store credit.
Many of these may be interest free for a certain period.
Store credit cards often offer discounts on their goods.
While they have high interest rates, they are often available to people with no or low credit scores.
If you need appliances or furniture, you may want to open a card with a store.If you need a vehicle, you can use dealer financing to purchase or lease one.
Remember to choose a car within your budget.
Do not buy a car unless you absolutely need one to get to work or school. , Many lenders may not be eager to extend credit to someone with no payment history.
If they are unwilling to give you a low balance card or a decent loan, you might try to convince them by lowering their risk.
There are two primary ways of doing this.
You can get a co-signer for your loan or you can sign-up for a secured credit card.
Finding a co-signer is one of the most effective ways of building credit when you have none.
A co-signer agrees to make payments on the debt in case you default.
They assume responsibility, and it is their creditworthiness dictating the terms of the loan.Secured credit cards are like credit-building loans in that they’re not really credit—they are subscription services that improve your credit score.
The subscription costs come in the form of interest and other fees.
About the Author
Theresa Sullivan
A passionate writer with expertise in DIY projects topics. Loves sharing practical knowledge.
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