Can you build credit fast?
Let’s imagine you’re one of the 120 million Americans with credit card debt. Your balance is too much and the high-interest rate made it difficult for you to keep up with your payments. What do you do? You opt to use debt settlement. You know that it’ll take you until retirement to pay it all off.
Settling debts makes sense because it involved debt reduction. And if you do it properly, you may get yourself free from debt in a year or two.
But here’s the thing. When your debts are marked “settled” in your credit report, that can affect your credit score. It won’t pull your score as much as bankruptcy would – but it will go down.
Fortunately for you, rebuilding your credit is possible. But what if you want to build credit fast? How can you do that after debt settlement? You need to follow certain tips to make this easier to accomplish.
4 tips to build credit fast
The truth is, rebuilding your credit is not an overnight thing. As much as technology has made purchases and credit processing fast, the same is not true for your credit score. No matter what you do, it won’t improve fast. That’s just not how it works. Even if you pay a huge amount of your balance, you won’t see that effect immediately. Like if you just completed a debt settlement program, it won’t pull your score up at once.
But don’t worry. While it’s impossible to build back your credit fast, it doesn’t mean you can’t make it go faster. But there are strategies that you can use to make it happen. Here are 4 options that you have.
Pay your bills on time
The first tip is to make sure you pay your bills on time. Even if you already settled your debts you still have a lot of bills to pay. Your utility bills and other debts that couldn’t be settled – like a mortgage or car loans. You still have to continue paying all these off. But with your other debts settled, it should be easier, right?
It should be easier. So even if you’re in a tough financial situation, you can still pay off your bills on time. All it takes is proper planning to make sure that all your bills are covered.
So if you haven’t checked your budget plan, now’s the right time to do it. After all, you have to regularly check your budget plan – especially if there’s a major change in your finances. And since you’ve just completed a debt settlement program, that’s the huge change that you need to reflect in your budget plan.
If you don’t change your budget, it’ll be harder to keep track of all the remaining bills you have to pay. If you can’t keep up, that could be a problem. It’ll make it harder to build credit fast. Don’t make things worse when you’ve already started to improve your finances.
Keep your balance low
Another tip to improve your credit score fast is to keep your balance low. This is for the debts that you weren’t able to settle. As mentioned, these are mostly secured loans that you have – like your mortgage loan or a car loan.
How do you take the balance of these debts down? One option is to make multiple payments. This works better if your debts don’t have a prepayment penalty on their terms. But even if there is, just do the math. If it turns out that you’ll save more even with the penalty, then it’s justified. Make multiple payments. The faster it takes to pay it off, the faster you’ll build your credit. You’ll end up saving more in terms of the interest payment too.
Plan your credit expenses
If you want to build credit fast, make sure that you keep on using credit. If you don’t use credit, there won’t be any entry in your credit report. There’s nothing to use to calculate your credit score.
So to increase your credit, you have to make sure that you keep your credit use up. But this time, you have to plan how you use it. That way, your credit card use will not compromise the improvements you’ve made to your finances.
This is where your budget plan will come into play again. Plan how much you’ll use your card. You see, your credit score won’t care about the amount – just that you used credit. Even if it’s small, that’s okay. It satisfies the need to use it. So keep your credit use low so you can pay it off in full.
Don’t close your credit card
Finally, you have to make sure that you don’t close any of your credit cards. When you just finished debt settlement, you’ll have a lot of credit accounts that now have a 0 balance. If you have no use for that card, it’s tempting to close it. When it’s closed, you won’t be able to use it. The temptation won’t be there.
But if you want to build credit fast, you can’t do this. You have to keep these accounts open. Closing accounts will affect your credit score negatively. It affects your credit limit and the age of your accounts. You see, the older the account, the more creditworthy you are. That boosts your credit score. So closing it will reduce the average age of your credit history.
If you really want to remove the temptation of the card, just leave it at home. But if you want to be free from the fees, wait until your credit score has gone up. Then you can close the account without worrying about your score going down too much.
What to do after you build your credit up
Now that you’ve worked on building your credit, what’s next? You have to maintain it. You’ve worked hard on that. It’s hard to build credit fast because it’s not something you can accomplish overnight. The fastest way to do that is to make sacrifices and discipline yourself.
After all the hard work, you have to make sure that it will last.
How? Here are two tips you can use.
Use your debt wisely
If you want to maintain your credit score, as explained, you have to keep using credit. But make sure you do it wisely.
What does this mean? It means no credit expense is done impulsively. It has to be planned. Otherwise, if it cannot be avoided, use cash. If you don’t have it, then don’t spend it. You have to be firm with these rules so you can get used to using credit wisely.
It’s not just about the spending, but also how you pay it back. Make sure your payments are timely and never below the minimum.
Keep an eye on your credit report
The other thing you have to do is to keep an eye on your credit report. The threat of identity theft is real. And the best way to catch them is by monitoring your credit report. If there are unauthorized entries, you have to call the attention of the creditors and the credit bureau that reported it. Flag it as an unauthorized transaction and they will investigate.
But they won’t know unless you tell them. So it’s your responsibility to always check your credit report. Even if you have the average FICO score of 711, that can quickly go down with just one identity theft incident. The earlier you can spot the crime, the higher the chances that you’ll come out of it unscathed.