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 homeownership, getting a better interest rate on credit cards, etc. Likewise, 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 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 creditworthiness was increasing!
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 cashback or travel rewards. We use both to build travel miles and get cashback 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 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!