If you are looking to rent your first student apartment with roomies, or considering living on your own for the first time in a residential apartment, or are contemplating your first home purchase, you need to know how to build credit. Building credit isn’t rocket science, but it does take some planning and discipline. And if you don’t have any credit history, figuring out how to build credit can be a little tricky. The number one question asked when contemplating how to build to credit is, “How do I build credit if no one will give me credit in the first place?”
The best way to build credit is to start simply and to start now. So without further ado, here are “5 Tips on How to Build Credit Fast.”
5 Tips on How to Build Credit Fast
1. Secured Credit Card
A secured credit card is a smart and simple way to start building credit fast. A secured credit card is basically a credit card that is backed by a cash deposit that you make up front. Almost all credit card companies have them and they are accepted pretty much everywhere. Generally, your credit limit is usually the amount of the deposit you make up front on the card. Secured credit cards are not meant to be used long-term. They are designed for the purpose of establishing and building credit long enough so that you qualify for an unsecured line of credit.
2. Use a Co-Signer
Using a co-signer on a an unsecured loan or credit card is another a viable way to build credit. But partnering with a co-signer can be dicey. It’s best that all parties involved are 100% aware of the full amount of what is owned before going into an agreement. In its most simplistic form, transparency always reigns supreme when in a co-signer agreement; make sure everyone is on the same page as both parties are finanically responsible.
3. Become an Authorized User
Amongst the many ways to build credit, becoming an authorized user is a fantastic way to build credit. A significant other or family member may be willing to add you as an authorized user, and if they’re responsible and have fantastic credit, your name is added to their credit history and credit card files. The beauty of becoming an authorized user is you don’t even have to utilize or even possess the credit to benefit from the credit building benefits. First and foremost, check with the credit card company of the primary user to ensure they report authorized users to the credit bureau; otherwise, you’re wasting your time.
4. Put Bills in Your Name
Think simple here. Almost everyone in 2020 has a cell phone bill or an online entertainment subscription such as Netflix, Xbox Live, or Spotify they pay for monthly. Get these small bills in your name immediately and make sure you pay them religiously each and every month. A great way to kill two birds with one stone is to get a secured credit card just for these payments only and simply have those bills set to auto pay each month to be charged to that secured credit card. Within a year, you’ll have a clear credit history.
5. Practice Good Habits
Nothing will ever replace good habits, discipline and responsibility. So make sure you do the following each and every month in order to build your credit and maintain an awesome credit score. Here are a few final tips and tricks to ensure you are always building credit in your favor:
- Avoid applying for multiple credit cards in a short period of time.
- Keep your credit card utilization low. In layman’s terms, make sure your credit limit is under a $1K
- Make sure you always make 100% of payments on time. Unpaid bills often get sold to collection agencies.