Content of the material
- Steps to Improve Your Credit Scores
- 6. Take out a student loan
- 3. Get a starter credit card
- How to build credit once you have a credit history
- Apply for a new credit card
- Request a credit limit increase
- Pay balances in full each month
- Check and understand your credit score
- 3. Pay Twice a Month
- 3. Become an Authorized User
- How to increase your credit score in 30 days
- 5. Apply for a Credit-builder Loan
- Ask for late payment forgiveness
- How much will this action impact your credit score?
- 5. Mix It Up
- Establishing or Building Your Credit Scores
- 3. Check your credit report for errors
- Pitfalls to avoid when working on your credit scores
Steps to Improve Your Credit Scores
The specific steps that can help you improve your credit score will depend on your unique credit situation. But there are also general steps that can help almost anyone’s credit.
6. Take out a student loan
Taking out a loan for the sole purpose of building credit can be beneficial. While Chase doesn’t offer student loans, this type of loan may be needed to help you pay for college.
All types of student loans — federal, private and refinance — will show up on your credit report. Loans will start counting toward your credit score when you start making payments.
3. Get a starter credit card
Credit cards are a great tool to start building credit. If you don’t have a credit history, you may have trouble qualifying for certain cards. If you’re a student, consider a student credit card.
You can also establish a credit history with a secured credit card . A secured credit card requires a security deposit or collateral. The cash deposit — typically $200-$500 — becomes your credit line. Secured credit cards aren’t offered by Chase, but it’s similar to a traditional credit card. They charge late fees in cases of missed payments and may have high interest rates as well as annual fees.
How to build credit once you have a credit history
Once you have gained access to credit accounts, follow these strategies to improve your credit score even more.
Apply for a new credit card
If you have a credit card that you are using responsibly, adding another credit card could improve your credit score even further.
When you apply for a new card, you will see your credit score dip by approximately five points because of the hard credit check. But, if you’re approved, your new available credit line should increase your utilization rate — one of the factors that determine your credit score — and help boost your credit.
We don’t recommend opening too many accounts in a short amount of time. This can cause your score to dip from hard inquiries and could signal to lenders that you’re in financial distress and may not be able to pay back your debts in the near future.
Request a credit limit increase
Similar to opening a new credit card, asking for a credit limit on an existing card increase will improve your utilization rate, which usually boosts your score. You should be able to request an increase online, but you can also call your credit card company to ask. It’s best to do this once you’ve demonstrated a pattern of healthy credit usage — on-time payments for at least six months — to increase your chances of being approved for a higher line of credit.
Pay balances in full each month
Keep your debt low and your available credit high to increase your score. The best way to do this is to pay off your card’s balance in full every month. To make sure this happens, only charge what you are able to pay off by the payment date.
You also want to ensure you’re paying on time to prevent being dinged for a late payment — and incurring late fees. Enrolling in AutoPay is an easy way to make sure you never miss a payment.
Check and understand your credit score
It’s important to know that not all credit scores are the same, and that they fluctuate from month to month, depending on which credit bureaus lenders use and how often lenders report account activity. So, while you shouldn’t worry if you see your scores rise or fall by a few points, you should take note when a big change occurs.
The two main consumer credit scoring models are the FICO Score and VantageScore. Here are the factors that comprise your FICO Score and how much each factor is weighed:
- Payment history (35% of your score)
- Amounts owed (30% of your score)
- Length of credit history (15% of your score)
- Credit mix (10% of your score)
- New credit (10% of your score)
Here are the factors influencing your VantageScore:
- Total credit usage, balance and available credit (extremely influential)
- Credit mix and experience (highly influential)
- Payment history (moderately influential)
- Age of credit history (less influential)
- New accounts (less influential)
There are a variety of options for checking your credit score for free.
For example, Discover cardholders can get a free FICO Score from the Discover Credit Scorecard, or anyone can get a free VantageScore by creating a LendingTree account. American Express and Capital One also offer free VantageScores to both card account holders and the general public, though many other card issuers offer free access only to their cardholders.
Here are the tiers that credit scores can fall into, according to FICO:
|FICO Score tiers|
|800 or more||Exceptional credit|
|740 to 799||Very good credit|
|670 to 739||Good credit|
|580 to 669||Fair credit|
|580 or less||Poor credit|
3. Pay Twice a Month
Let’s say you’ve had a rough couple of months financially. Maybe you needed to rebuild your deck (raising my hand) or had to get a new fridge. If you put big items on a credit card to get the rewards, it can temporarily throw your utilization ratio (and your credit score) out of whack.
You know that call you made to find out the closing date? Make a payment two weeks before the closing date and then make another payment just before the closing date. This, of course, assumes you have the money to pay off your big expense by the end of the month.
Take care not to use a credit card for a big bill if you plan to carry a balance. The compound interest will create an ugly pile of debt pretty quickly. Credit cards should never be used for long-term loans unless you have a card with a zero percent introductory APR on purchases. Even then, you have to be mindful of the balance on the card and make sure you can pay the bill off before the intro period ends.
3. Become an Authorized User
An authorized user is someone who is added to an existing credit card account. Authorized users can use the card but will not be responsible for any payments. When you become an authorized user, the card’s history will appear on your credit report. If the main cardholder has made on-time payments, then your credit score may receive a boost.
How to increase your credit score in 30 days
Most of our tips above for how to build credit fast will show results within 30 days. For example, improving your utilization rate (charging less to your credit cards or paying down some of your debt) or becoming an authorized user will impact your credit as soon as the credit card company updates your account with the credit bureau. This typically happens once a month.
Rebuilding bad credit or establishing credit for the first time, however, can take longer. Creditors prefer to see at least six months of positive payment history after a missed payment, for example. It can also take up to six months of new credit history to qualify for your first credit score.
5. Apply for a Credit-builder Loan
A credit builder loan is geared toward borrowers with no credit history who don’t want to open a credit card.
To use a credit builder loan, you first decide on the amount and term. Instead of receiving the money upfront, every month you make a payment to the lender, and they report it to the credit bureaus. When the term is completed, you receive back the amount you paid, minus possible fees.
If you made payments on time, you should have improved your payment history and therefore boosted your score.
Ask for late payment forgiveness
Paying on time constitutes 35% of your FICO Score, making it the most important action you can take to maintain a good credit score. But if you’ve been a good and steady customer who accidentally missed a payment one month, then pick up the phone and call your issuer immediately.
Be ready to pay up when you ask the customer rep to please forgive this mistake and not to report the late payment to the credit bureaus. Note that you won’t be able to do this repeatedly — requesting late payment forgiveness is likely to work just once or twice.
You have 30 days before you’re reported late to the credit bureaus, and some lenders even allow as long as 60 days. Once you have a late payment on your credit reports, it will stay there for seven years, so if this is a one-time thing, many issuers will give you a pass the first time you’re late.
How much will this action impact your credit score?
If you’re a day or two late on a credit card payment, you might get hit with a late fee and a penalty APR, but it shouldn’t affect your credit score yet. However, if you miss a payment by a whole billing cycle, it could drop your credit score by as many as 90 to 110 points.
If you fall 30 days or more behind, you can try sending a “letter of goodwill” or “goodwill adjustment” to the credit card issuer. In this letter, you’ll take responsibility for the late payment and request the issuer remove it from your credit reports. The issuer isn’t required to comply, but for a loyal customer with a good record, it doesn’t hurt to ask.
The suggestions for how to build credit fast depend on your situation. If you have no credit, becoming an authorized user on an established account is how to build credit fast. Even if you already have a credit history, becoming an authorized user can still help. However, you may get better results from paying down your credit card balances or boosting your credit limits. This will improve your credit utilization ratio, which is a big part of your credit score.
Sadly, it's nearly impossible to boost your credit score overnight. At minimum, focus on how to improve credit score in 30 days. Several of our tips for how to build credit fast can show results within the first 30 days. This includes paying down debt, increasing your credit limits, becoming an authorized user, and disputing credit report errors.
The best way to boost your score 100 points is to let nature take its course. Specifically, pay your credit accounts on time, in full, every month — and watch your score grow. If you're wondering how to build credit fast, a 100-point jump is less likely, but not impossible. Paying down high balances can lead to dramatic credit score improvements. Removing credit report errors can also lead to big score increases.
5. Mix It Up
A few years back, I realized I didn’t have much of a mix of credit. I have credit cards with low utilization ratios and a mortgage, but I hadn’t paid off an installment loan for a couple of decades.
I wanted to raise my score a nudge, so I decided to get a car loan at a very low rate. I spent a year paying it off just to get a mix in my credit. At first, my score went down a little, but after about six months, my score started increasing. Your credit mix is only 10% of your FICO score, but sometimes that little bit can bump you up from good credit to excellent credit.
I wasn’t planning on applying for credit within the next six months, so my approach was fine. But if you’re refinancing your mortgage (or planning something else really big) and you want a quick boost, don’t use this strategy. This is a good one for a long-term approach.
Establishing or Building Your Credit Scores
Depending on your experience with credit, you might not have a credit report at all. Or, your credit report might not have enough information that credit scoring models are able to assign you a credit score.
With FICO® Scores, you need to have at least one account that’s six months old or older, and credit activity during the past six months. With VantageScore, a score may be calculated as soon as an account appears on your report.
When you don’t meet the criteria, the scoring model can’t score your credit report—in other words, you’re “credit invisible.” As a result, creditors won’t be able to check your credit scores, which could make it difficult to open new credit accounts.
Some people may be in a situation where they’ve only opened accounts with creditors that report to only one bureau. When this happens, they may only be scorable if a creditor requests a credit report and score from that bureau.
If you’re brand new to credit, or reestablishing your credit, revisit step one above.
3. Check your credit report for errors
One way to quickly increase your credit score is to review your credit report for any errors that could be negatively impacting you. Your score may increase if you are able to dispute them and have them removed.
About 25% of Americans have an error on their credit reports, so it's important to take the time to review. Some common errors to look out for include fraudulent or duplicated accounts, as well as misreported payments.
"Most of the clients we meet with have not reviewed their report within the past year, and are often surprised by what we find to discuss with them," says Thomas Nitzsche, a financial educator at MMI.
Pitfalls to avoid when working on your credit scores
When it comes to building credit, it’s easy to get overly focused on ways to raise your credit scores fast. The truth is that building credit takes time. So take a step back and make sure your strategy doesn’t do more harm than good.
Here are a few “don’ts” to keep in mind.
- Don’t apply for a bunch of new credit cards just because you want to increase your credit utilization. Even though this might help lower your credit utilization ratio, it could also make you look like a risky borrower thanks to the new hard inquiries on your reports.
- For the same reason, don’t take out a loan just to improve your credit mix. Only apply for a new loan if you actually need it.
- Don’t carry a balance on your credit card just so you can build credit. Carrying a balance can lead to unnecessary interest charges, and it might actually hold your scores down by increasing your credit utilization ratio.
- Don’t cancel your credit card after you pay it off — unless you have a good reason to do so. Closing your credit card will hurt your length of credit history, so it’s better to leave it open, even if you’re not using it anymore. Of course, if having a card tempts you to spend more, or it comes with an expensive annual fee, you might want to rethink this conventional wisdom.