It can be a bit tricky to build credit. It is quite difficult to build a credit history without having a credit card and without a credit history; it is difficult to qualify for a credit card. However, if you start from the bottom and make use of available credit in a responsible manner, you will surely make your way towards an excellent and impressive credit history. Some of the steps that you can follow while trying to learn How To Build Credit Fast are as follows:
Step 1: Understanding the factors Influencing FICO Score
FICO score is the credit scoring model which is used on a common basis. There are several factors that make up the FICO score of an individual and they are as follows:
• Payment History: You must make it a point to make all your payments within time as this is quite important. Late payments might cause a blow to the credit score. This might even cost you penalty interest rates and fees.
• Credit Utilization: If you are looking for good credit score, then make it a point to keep the debt balances very low in comparison to credit limits. It is advisable to keep the credit utilization much below 30%.
• Credit History Length: It is always better to have a long credit history because potential lenders will find you creditworthy. The credit history length is calculated depending on the ages of the oldest and the newest accounts, including average age of all the credit accounts.
• Credit Types in Use: Your credit will be impacted in a very small manner if you have a complete blend of various credit accounts.
• New Credit: Your credit score can come down if you apply for a number of credit accounts at the same time.
The data influencing these factors are available from credit report of an individual. Credit reports can be availed from three of the most important reporting agencies namely TransUnion, Equifax and Experian. You also get a FICO score from these three agencies.
Step 2: Learn the basic Guidelines of Building Credit
Loan lenders make use of the credit score of an individual for determining his or her financial trustworthiness and ability to repay debt. It is necessary for you to practice healthy credit habits for building your credit score and for proving your creditworthiness. Never take out loans for people with no credit unless you want to drop your credit score. These types of loans carry high interest rates and will drop your credit score.
• Credit debt should be kept low. You must never allow your debt balance to exceed 30% of the credit limit at any point of time. Keep in mind that balances get reported mid-billing cycle, where high balance automatically means high utilization of credit. Make all your payments on time. This applies not only for the credit accounts but even for the other accounts that you might be having.
• Make it a point to use your credit card on a regular basis. This is because unused credit accounts are closed by the issuers and closed accounts do not offer healthy credit history.
• Check your credit reports every year for discrepancies and errors.
Step 3: Know the Procedure of Checking Credit Scores and Reports
You have the right of getting one free credit report annually from all the three credit reporting agencies. You must try getting your credit report from these agencies and make it a point to note if there are any mistakes. Note that you will not find your credit score in the credit report and there are a number of ways in which you can get the score. There are some free options that you can use on the web or you can purchase the FICO score directly from the credit bureaus.
Step 4: Getting a Credit Card on Low or No Credit
Now that you have a basic understanding of the major factors influencing your credit score, it is time for you to start with the procedure of building credit by making use of a credit account. You can apply for a secure credit card, go for an unsecured credit card or a cosigner or become an authorized user.
Step 5: Try to be Patient
It is only that you need to be very patient in building your credit if you are sure of following all the above mentioned guidelines responsibly.