Luckily, all you have to do is follow a few simple tips and tricks and you’ll soon be on track to improve your credit score. Read on to find out how to build credit with a credit card fast.
1. Pick the Right Credit Card for You
The first step is to make sure you get the right card for your needs. For example, if your goal is to build credit, then you don’t need a high-limit card with all the bells and whistles.
Here’s how to choose a credit card and use it to build credit:
Get a credit card with a competitive annual percentage rate (APR) so your payments go toward the balance of your purchases, and not only toward paying interest.
Get a credit card with a limit that will allow you to make purchases and still have a lot of available credit.
Start by making small purchases only, so you can easily meet at least your minimum payment due.
2. Pay On Time Each Month
A history of timely payments is a key element in a great credit score. Here are a few reasons to keep an eye on your credit card due dates:
Paying on time will boost your score, while late payments will hurt your score.
Late payments often mean you have to pay extra fees.
Note: Paying your utility bills on time doesn’t improve your score, but missing multiple bills can hurt your score, especially if a bill is sent to a collections agency.
3. Avoid Maxing Out Your Card
The more credit you have available on your card, the better your credit score. How much available credit you have is called your debt-to-credit rate, or the credit utilization ratio.
Here’s how your available credit affects your credit score:
If you max out your card, you’re using 100% of your available credit and this is bad for your credit score.
The recommended amount of credit to use is less than 30%. For example, if your credit limit is $1,000, you should aim to use only $300.
Using less of your available credit will help build your credit faster!
4. Pay Your Balance In Full When Possible
It’s a good idea to pay off your entire balance as often as you can – and here’s why:
Carrying a zero balance means you have a great credit utilization rate.
You won’t have to pay interest on your purchases.
Note: If you have multiple credit cards and no longer need one of them, you should keep the account open because the length of time you’ve held credit is another part of your credit score.
How Credit Works
Now that you know some tips for how to build credit with a credit card fast, it’s a good idea to know how credit reporting works.
There are three main credit reporting agencies and each of them uses a slightly different method to calculate your credit score from your financial history. That’s why your score might be different from bureau to bureau.
Information about relevant transactions and payments is sent automatically from your credit union to the credit agencies so you don’t have to worry about the right details getting through.
The information is usually sent at the end of each month, meaning there will be a small delay between when certain activity happens and when it shows up in your credit report.
Here’s a quick recap on what goes into your credit score:
Your payment history – late payments hurt your score.
Your debt-to-credit rate or credit utilization ratio – having a lot of available credit boosts your score.
How long you’ve held credit accounts – the longer, the better.
How many types of credit accounts you have (credit cards, loans, a mortgage, etc.) – the more variety, the better.
New credit. It’s a good idea to gradually add new types of credit accounts to your financial record – but not too many types at the same time.
When You’ll See Results
The time it takes to see a positive change in your credit score depends on where your credit is now and why it’s lower than you would like.
If you’re just starting on your financial journey and have little or no financial history, you might see your score grow within a few months.
If you’re carrying a lot of debt and have a record of missed payments, or have declared bankruptcy, it may take longer to see a positive change – sometimes years.
To build credit with a credit card fast, make sure you work out a budget so you don’t spend more than you can afford, and watch your due dates so you never miss payments.
Build Credit With a Credit Card Fast: Picking the Right Card
If you’ve decided a credit card is the right way for you to boost your credit, then all that’s left to do is pick the right card for you.
It’s a good idea to compare credit limits, interest rates, and the fees on different cards before you apply for your credit card. Click below to find out more about the different fees!