Building credit is a slow and painful process. Because of a weak credit profile, it can seem impossible to obtain loans with decent interest rates, credit cards with decent limits, or even use financing to buy a home. It can feel frustrating, and to make it even worse, low credit can continue to trap you in a cycle that’s hard to break. This is why we have made a list of 5 Ways To Build Credit scores. We even describe the one strategy that can create results almost instantly.
1. Make Sure All Payments Are On Time
On FICO, payment history is the most important factor. It contributes to 35% of the score. Credit bureaus are very strict about tracking bills, and even one missed payment can hurt a score significantly. One missed payment can have an impact that is almost never correctable. The solution is simple but requires the most self-control. Be on time with every single payment. This means every credit card, every installment loan, every auto loan, every other recurring payment obligation. To reduce the risk of forgetting, you can set up automatic payments. If you don’t have that option, just set a reminder on your phone or some other digital calendar.
Strategically, dressing up as a user on a tradeline can lighten the burden of payment history, especially if the account being used is old. The account being used will have many previous reports of submitted payments. This can lighten the burden of history that you have to build up on your own.
2. Keep Your Credit Utilization Low
With every credit card, you have a credit utilization ratio that balances the credit you are given with the credit you use. This number is used as a score and ranks second only to payment history in importance. The goal is to stay under 30% utilization, and the less you have, the better off you will be.
The ratio used to determine your score is in your control, as you determine the credit being used and the credit being given. This is the most overlooked piece of information. If you have high balances or a large portion of your credit, this should be a priority to fix.
Adding an authorized user tradeline that has a high credit limit and a low balance can quickly improve a person’s credit utilization ratio. Because credit utilization is calculated in a specific way, a person’s credit score can improve quickly (usually within a month’s credit card billing cycle).
3. Add to Your Credit Diversity
Credit scoring systems appreciate when a borrower can show that they can handle various types of credit equally. This is called credit diversity, and it makes up 10% of a person’s FICO score. Credit scoring systems appreciate seeing a loan in an account that collects bills, and, in addition, a card account that offers revolving credit.
If a person’s credit score is low and they have not taken on much debt, adding variety to their credit system can significantly improve it. An authorized user tradeline can provide people with credit diversity without requiring them to apply for credit. This is ideal because new credit applications result in hard inquiries, which can temporarily lower a person’s credit score.
4. Check Your Credit History
Your credit report contains an infinite number of irregularities and mistakes that would otherwise drag down your credit score, and you may never even find out about them. Whether it is a simple spelling mistake, a missed payment that wasn’t missed, or an account you closed, any of these mistakes may end up on your report.
This is why reviewing your credit report is so important to developing a clean report. It’s important to know that you are entitled to one free copy of your credit report from each of the three major credit bureaus so that you can start monitoring and stop reporting mistakes.
There are a number of free services that can monitor your credit account and notify you about changes. This is particularly important for new credit accounts, as you can see how those accounts affect changes to your credit score. These services can help you see how your credit report changes.
5. Add Tradelines as an Authorized User
As a suggested strategy to enhance your credit score, the most effective option is to add tradelines as an authorized user. When you add an account as an authorized user, you ‘inherit’ the account holder’s credit history, total credit limit, and the age of the account, so you can benefit from that individual’s credit history, and you don’t have to take out any debt.
The difference an account can make is very large. A well-chosen tradeline can do the following: improve your payment history, reduce your utilization ratio, and significantly increase the age of your accounts. For thin credit files or scores that have been set back, this is the most effective option for you.
At Coast Tradelines, we find high-quality authorized user tradelines, and we help you reach your credit objectives by finding the tradelines that are the best fit for your credit situation, and whether you are building your credit from the beginning or need to add a few to your credit accounts to help improve your credit score.
Most accounts report to the credit bureaus every one to two billing cycles, so depending on when you see an update, you can see changes in as little as thirty days.
Last Notes
Improving your credit score can seem like an overwhelming and slow process, but a combination of techniques can increase your score more quickly than traditional practices. These practices include regularly scheduled payments, a mixture of credit, diversified control utilization, and the use of authorized user tradelines.
Let us assist you at Coast Tradelines.
