Best Ways to Build Credit

5 Steps to Raise your Credit Score

Having and maintaining a high credit score is essential to being financially healthy. Here are five steps to raise your credit score:

1. Check your credit report:

   Get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) and review it for errors. Dispute any errors you find, as they can be negatively impacting your credit score.

2. Pay your bills on time:

   Payment history is one of the most significant factors that determine your credit score. Late payments can have a significant negative impact on your credit score, so make sure you pay your bills on time each month.

3. Keep your credit utilization low:

   Your credit utilization ratio is the amount of credit you’re using compared to your total available credit. Keep your credit utilization for each individual credit card below 30% to maintain a good credit score.

4. Apply for credit sparingly:

   Each time you apply for credit, it generates a hard inquiry on your credit report. Too many hard inquiries can hurt your credit score, so only apply for credit when you really need it.

5. Length of Credit History:

   Keep credit card accounts open unless you have a compelling reason to close them. The average age of all of your credit accounts makes of 15% of your overall score

Fastest Ways to Build Credit

Adding yourself as an authorized user to a family member’s or significant other’s card can reduce the amount of time it takes to generate a FICO score. It adds that card’s payment history to your credit files, and you don’t have to use or possess the credit card at all to benefit from it. But, you should come to an agreement on whether and how you’ll use the card before being added as an authorized user.

Rent-reporting services such as Rental Kharma and LevelCredit take the bills you’re already paying and put them on your credit report, helping to build a positive history of on-time payments. Some credit scores take these payments into account, which may be enough to get a loan or credit card that firmly establishes your credit history for all lenders. Experian Boost offers a way to have your cell phone and utility bills reflected in your Experian credit report.

Best Cards to Build Credit

If you’re building your credit score from scratch, you’ll likely need to start with a secured credit card. Secured credit cards are backed by a cash deposit you make upfront, and the deposit amount is usually the same as your credit limit. The minimum and maximum amount you can deposit varies by card, and many require a minimum deposit of $200. Some companies, such as Avant, Deserve, and Petal, now offer alternative credit cards that don’t require a security deposit.

The purpose of a secured card is to build your credit enough to qualify for an unsecured card — a card without a deposit and with better benefits. Choose a secured card with a low annual fee and make sure it reports payment data to all three credit bureaus (Equifax, Experian, and TransUnion). Your credit score is built using information collected in your credit reports; cards that report to all three bureaus allow you to build a more comprehensive credit history.

Another credit card for a low credit score, or if you lack credit history, is a store credit card. Store credit cards are another option for building credit. These cards are offered by retail stores. Store credit cards are easier to get approved for than traditional credit cards, but they typically come with higher interest rates and fees. You should only consider this option if you have not struggled with over spending or struggle with credit card debt due to shopping.