Demystifying Credit Scores
It's time to talk about something that might seem a little scary.
But it doesn't need to be.
Do you feel that your credit score could use a boost? Maybe you're planning to get a new car, or a house, or perhaps you want to start your own business, and need that score looking as shiny as possible. We understand. A robust credit score can be a powerful tool to navigate life's big financial milestones. And this blog's here to help.
In this blog, we'll break down what a credit score is, why it matters, and most importantly, we'll discuss proven strategies on how to build credit fast 🚀
1) Understanding Your Credit Score
Before we dive into how to build credit fast, it's important to understand what a credit score is. In a nutshell, it's a numerical measure of your trustworthiness to lenders, landlords, and sometimes even employers.
What's a Good Credit Score?
Credit scores range from 300 to 850, with higher scores reflecting better credit habits and responsibility. They're typically broken down into categories ranging from 'poor' to 'excellent.'
According to Experian, one of the three major credit bureaus in the United States, credit scores are typically broken down as follows:
Excellent Credit: 800 to 850
Very Good Credit: 740 to 799
Good Credit: 670 to 739
Fair Credit: 580 to 669
Poor Credit: 300 to 579
A 'good' credit score is usually defined as 670 or above. This is the minimum credit score needed for many conventional loans.
A 'poor' credit score is typically defined as any score below 580. With a score in this range, you may have difficulty getting credit, or you may be required to pay higher interest rates or fees 🙃
If your credit score isn't where you want it to be right now, you're not alone. Building a strong credit score is a journey, not a sprint. But with the right guidance, you can certainly speed up the process 🌞
2) How to Build Credit Fast – The Basics
In this section, we'll explore the foundation of how to build credit fast.
Consider a Credit Card
Consider a credit card as your ticket into the world of credit building. It's not the only way, but it's the easiest and most accessible for most people. Whether it's a secured card, student card, or one cosigned by a family member, getting a credit card is your passport to better credit.
Make Payments on Time
This is a no-brainer but still worth mentioning. Late payments can cause significant dents in your credit score. Establishing a history of on-time payments is a surefire way to build credit fast.
Maintain a Low Credit Utilization Ratio
Your credit utilization ratio is the amount of credit you use divided by the amount of credit available to you. Keeping this ratio below 30% is a pro tip for those wondering how to build credit fast 💪
3) Fast-Track Strategies on How to Build Credit Fast
With the basics covered, let's cover strategies that can accelerate your credit-building journey.
Rent Reporting Services
Did you know that your rent payment history can help boost your credit score? Services like Rental Kharma and RentTrack take a bill you are already paying and put it on your credit report. Nice.
Get a Co-signer
If you have someone with good credit who's willing to co-sign a loan or credit card application, this can provide a significant boost to your credit score. But remember, they are equally responsible for any debt incurred.
4) Nurturing Good Financial Habits
Learning how to build credit fast is not just about quick fixes – it's also about learning good financial habits that you can stick to.
Review Your Credit Report
Regularly reviewing your credit report helps catch errors and track your progress. You're entitled to a free report from each of the three major credit bureaus (Experian, Equifax, and TransUnion) once a year through AnnualCreditReport.com. To find out more, check out How to Get a Free Credit Report 💳
Diversify Your Credit
Lenders like to see a mix of credit types — retail accounts, credit cards, installment loans, etc. But remember, don't open new accounts just for the sake of diversity. It's all about balance.
Keep Old Accounts Open
The length of your credit history matters. Keeping old, positive accounts open, even if you don't use them, can be beneficial for your credit score.
Accelerate Your Credit Journey
We've covered the basics, outlined strategies, and discussed habits to help you understand how to build credit fast. Remember, improving your credit score isn't a one-and-done deal, it's an ongoing process.
And there's no better time than the present to start your journey on the fast track to better credit.
Try and put these strategies into action, and see how empowering taking control of your credit can be. Soon enough, you'll be exactly where you want to be on your credit journey.
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Big love. Cleo 💙