You can't build excellent credit overnight, but there are some strategies you can use to build your credit relatively quickly. The fastest way to build credit is to be intentional about how you approach every credit account, focusing on building a positive payment history and avoiding damaging credit mistakes.
If you're starting to build your credit from scratch, expect to wait six months before you have a credit score. The credit-scoring algorithm needs you to have at least one account active for three to six months before it can generate a credit score for you.
Become an Authorized User
Being an authorized user means you can use another person's credit card, but don't have the responsibility of making payments. Once you're an authorized user, the entire account history may be added to your credit report and factored into your credit score.
If you're added to someone's credit card, it should ideally be a friend or family member's account with a low balance and no history of late payments. If you become an authorized user on an account with a negative credit history, it could actually be harmful to your own credit report.
Some credit repair companies claim they can help you improve your credit score by selling you tradelines—accounts with well-established credit histories that you can add your name to for a quick credit boost. However, credit scoring companies are sophisticated enough to tell when you're a legitimate authorized user on an account from a relative and when you've been added to an account for the sole purpose of boosting your credit score.
Get a Secured Credit Card
A secured credit card is easier to get approved for than an unsecured card. You can control the credit limit on a secured credit card by paying a higher security deposit. Being responsible with bigger credit limits will help boost your credit score, allowing you to qualify for unsecured credit cards with higher credit limits.
Make sure the secured card you choose reports your activity to all three major credit reporting bureaus.
Pay on Time
Once you have accounts of your own, paying on time is the best thing you can do to build a good credit score. Payment history is the biggest factor influencing your credit score. The more on-time payments you have, the better.
You only need to make the minimum payment by the due date each month for your payment to be considered on time, so aim to pay at least the minimum. Just make sure to send it in so it arrives on time.
Keep Your Credit Card Balances Low
The second biggest factor that affects your credit score is the amount of debt you're carrying. Keeping your credit card balance under 30% of the credit limit is ideal for building credit.
You can decrease your credit utilization, or the amount of credit you're using, by making frequent payments on your account throughout the month so you won't build a balance as your payment due date nears. Instead, frequent payments (twice monthly or more often) reduce your total credit utilization by reducing the amount you owe at any point in time.
Correct Errors on Your Report
Any negative information on your credit report can make it harder to build your credit. For example, old debt collections or other unpaid bills can hurt your score, so it's best to take care of these before you start trying to improve your credit score.
In addition to negative information that's accurate (in other words, you really did neglect to pay those bills), there may be inaccurate information that's also harming your score.
To find out whether errors or inaccurate information is harming your credit score, order a copy of your report from each credit bureau. You can do this for free through AnnualCreditReport.com. Then, carefully check each report for errors.
You have the right to an accurate credit report, which allows you to dispute errors with the credit bureaus. If you spot errors, write to the credit bureaus and ask them to remove the inaccurate items from your credit report. If you have proof an error, send a copy to help support your claim (but keep the original for your records).
Open a New Account
After you've established your credit history with one account, it can help to open another, if you're ready. Having another account will increase your available credit if you work hard to keep your utilization low. Just as with your other accounts, it's best to not charge more than you can afford, make timely payments, and always pay at least the minimum amount due.
But take care. While you're working to build your credit as quickly, you want to avoid mistakes that could backfire. Opening too many credit cards in a short amount of time can hurt your credit score in the short term. Taking on more credit cards than you can handle can also put you at risk of late payments, which will hurt your credit score.
The Bottom Line
Building your credit involves demonstrating that you can handle credit responsibly. Having open, active accounts that you're paying on time is the fastest way to build your credit.
Frequently Asked Questions
How long does it take to build credit?
It can take up to six months to start building credit once you open an account, but building and maintaining a good credit score takes longer. Once you have a credit report, new information will be added whenever your creditors report information to the credit agencies. They typically do so once a month, but companies have flexibility in how often or what they report. Any new information will impact your score positively or negatively. Over time, enough positive impacts will increase your score and keep it high.
What bills will help build credit?
Credit card bill payments positively impact your credit score, because you're simultaneously making an on-time payment and reducing your credit utilization. Mortgage and car loan payments also help build credit for these same reasons. Utility bills, like electricity or internet bills, can impact your credit score, but they won't usually help you build credit. Utilities usually only report your information to the credit bureaus when they have negative information, such as missed payments.
How can I build credit at age 17?
If you aren't yet 18, then your credit options will be limited. You certainly won't be able to open a credit card account. You may be able to get added to a parent or guardian's credit card, and it won't hurt to ask, but some credit card companies may feel uncomfortable with a minor drawing on credit.