How to build good credit quickly

How to Build Credit Fast

Since you’re reading this, you probably have at least a few financial goals that you want to achieve. Maybe you want to buy a car, purchase a new home, or even just build up your savings. However, there’s one big problem standing in your way: you currently have no credit or poor credit. You need to build credit fast.

Lacking a credit history can hold you back from achieving a variety of goals, including home ownership, getting a better interest rate on credit cards, etc. Likewise, a bad credit history can seem like a huge burden that holds you back from financial success.

Luckily, there are some proven ways that you can build credit fast. You can do this!

While I’ve been building my credit history since college, my husband only just started several years ago. He emigrated to the US after he completed college and needed to get credit established quickly so we could achieve our goals. Gaining a solid financial footing in a new place is not always easy, and it takes effort.

We knew that we needed to take action to start building good credit fast.

Let’s explore the best ways to build credit quickly:

Secured Credit Cards

When we merged our accounts and created a joint one, our bank offered my husband a secured credit card. He didn’t accept right away, as we wanted to do a little more research.

He applied for a very basic credit card from Capital One, but was declined due to lack of history. It became clear that the secured card from our bank was the best way to start building credit fast.


Cons of the Secured Card

The downside to a secured credit card is that we had to hand over $300 of our own money to fund the account. What this means is that you are basically giving yourself a line of credit to prove that you can handle spending and make the monthly payments on time. The bank issues you the card, and they then report on your spending habits to the credit bureaus.

All of the secured cards that we looked into came with an annual fee, too. This is frustrating because you’re trying to build credit and improve your finances. You already have to hand over your own money in the process. Ugh. The annual fee for my husband’s card was $25. Not too bad to get started, but certainly not a plus.

The good news is that you do get your money back that you put on the card as a line of credit, but not the annual fee. The $300 for the credit line was returned once the bank deemed my husband worthy of maintaining an unsecured account. It took less than a year of responsible spending for that to happen.

Since it’s best to keep your spending at or below 30% of your limit, we went ahead and set up our cell phone payments on his card. That was the only thing that went on it, and we paid it off in full every month. We used Credit Karma to check his credit report, and sure enough after just one month, he had a credit history starting to build!

With a secured credit card, you can be on your way to building good credit fast!

Obtaining a Regular Credit Card

Once you’ve made a start with a secured card, you want to get the real thing, right? Of course you do!

After only a few months of using the secured card, offers started arriving for other regular credit cards. My husband took a chance and applied for the Discover card since it offers a cash back bonus  He was approved instantly, and extended a higher line of credit.

We were very pleased! After just a few months of using a secured card and making payments in full, my husband’s credit worthiness was increasing!

Tip:

Do your research and find a credit card that offers a low interest rate and some type of rewards. There are some great ones to choose from today that offer cash back or travel rewards. We use both to build travel miles and get cash back to go towards our payments.

Build credit fast from scratch with a limited credit history

If you have limited or no credit history, don’t wait to start building it!

Check in with your credit report using a free service. There are many good ones available today. I have used Quizzle, Credit Karma, and Credit Sesame. Everyone should be checking their report throughout the year to ensure that there are no mistakes or fraudulent accounts in their name. Don’t forget to do this frequently.

Pay attention to your spending

Once you do get a secured credit card, watch your spending very closely. Don’t max it out, and always make the payments in full on time. Aim to use only 30% of your limit every month. Remember that you’re demonstrating your credit-worthiness. It takes effort!

If you can’t afford to pay off your card every month, you could be headed down a dangerous road to dependency on credit.

Use credit cards as a tool to establish a history, and not as an invitation to buy stuff that you can’t afford.

It takes time and effort to establish your finances and to build credit from scratch. Remember, everyone has to start from somewhere! I know, because I’ve experienced it firsthand with my husband.

The most important thing to remember is that you want to show creditors and lenders that you’re responsible, so use credit cards carefully and strategically. If you can do this, you should be well on your way to building a strong credit history!

 

How to build credit from scratch

17 comments on “How to Build Credit Fast

  • femmefrugality , Direct link to comment

    I built my credit originally through co signed loans. The interest was far more than $25/year, so I’d say that’s not a bad price to pay! Getting started always sucks, but it sounds like things are moving pretty quickly for him!

  • DC @ Young Adult Money , Direct link to comment

    Great tips for people who are trying to build credit out of nothing. I think another good tip is to just get started. The sooner you start, the sooner your history will age, the sooner your credit score will go up and be more established, etc. Best of luck to your husband as he establishes credit!

    • Lauren , Direct link to comment

      Thanks DC! You make a great point- we waited for several months, as it just got pushed to the back burner. Definitely should have started right away.

  • Derek @ MoneyAhoy.com , Direct link to comment

    Lauren, it sounds like you guys are on the right path.

    My parents did me an awesome favor by adding me to their CC accounts when I was old enough to drive and add gas to the car. This helped me to establish 5-6 years of credit before graduating college.

    From there, I took out a loan to purchase a used car (even though we could pay cash for it) just to build credit. I paid it off after a couple months. This helped establish even more credit history.

    Good luck!

    • Lauren , Direct link to comment

      That’s great Derek! I didn’t know that being added to accounts helped build credit. I’ll have to keep that in mind when my daughter gets older. I’d love to help her out in that way.

  • E.M. , Direct link to comment

    I am surprised Capital One declined him. I applied for my first credit card with them and was approved at 18. I’m glad Discover came through! The secured card sounds like a bit of a hassle, but at least it worked out.

  • Liz , Direct link to comment

    When we were first married about 4 years ago, I was a student and my husband had landed his first job. We opened up our first credit card together. The bank gave us a limit of $500. Took a few years to really build up that credit together. We were also dealing with him becoming a permanent resident. Not easy stuff.

    • Lauren , Direct link to comment

      I know what you mean- it’s a tough road getting settled as a permanent resident! The last thing my husband has to do now is get his state driver’s license and we will finally be done with the to-do list, as far as that goes.

  • Kurt @ Money Counselor , Direct link to comment

    I had a similar experience when we moved to Canada from the U.S. Credit histories don’t cross international borders! Though I had lots of money on deposit at a local bank and even owned shares of the bank’s stock, it refused to issue a credit card with a $5,000 limit. After a threatening letter to the branch manager, the bank relented. 🙂

  • John @ Sprout Wealth , Direct link to comment

    Glad to hear that M was able to get an unsecured card after some time with the secured card. It’s a shame that many times you need to go through with the secured option to get started building credit as most of them just aren’t that good at all.

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