How To Build Credit Fast And Easy

These days having good credit is of the utmost importance. When you have a poor credit score or no credit, you may have difficulty getting even the bare necessities of life. We live in a credit economy and therefore it becomes important to learn how to build credit fast.

People with no credit or poor credit find themselves having a hard time securing a place to live, having utilities turned on, finding a job and more.

A potential landlord or employer has no way of judging you other than by looking at the documents you provide along with your "permanent record" in the form of a credit report.

A clean credit report indicates that you are mature, trustworthy and responsible. One with a lot of (or even a few) problems can be a death knell for your chances to get a good job, housing and utility services.​

Employers

  • Many employers run a credit check as a routine part of the decision making process when hiring new employees.
  • Having poor credit could keep you from being hired.
  • Sometimes it can lose you your job if your employer runs a credit check on you after you have been hired.

Landlords

  • Landlords also use information from credit reports when evaluating potential renters.
  • If you have poor credit or no credit, it could mean you would have to live in a hotel or motel or similar situation. This is a costly and insecure way to live.​

In this article, we will discuss the importance of keeping tabs on your credit reports, help you learn how to read and fix your credit reports and offer information on how to establish credit and maintain a good credit record.

​How & Why You Should Make Good Use Of Free Credit Reports

Often times things you did realize would cause you problems turn up on your credit report and badly impact your life. For example, neglecting to pay a utility bill or defaulting on credit cards or other types of loans can turn up to haunt you at the most inopportune times. This type of event stays on your credit report for as long as a decade and can prevent your being able to move forward financially.

SEE ALSO: Does Paying Off Credit Cards Help Credit Score?

​There are three major credit reporting bureaus in the United States. They are:

When you keep tabs on your credit reports and make sure all information contained therein is accurate, you can avoid nasty surprises and disappointments when applying for jobs and seeking financing. According to the Federal Trade Commission (FTC), to order your free annual credit report, you should go through an official central website that has been set up for this purpose.

The official credit report website: http://www.annualcreditreport.com​

You can also call 1-877-322-8228 or visit Credit Bureau Phone Numbers for more information.​

Alternately, you can make your request by mail. To do this, you would download and fill out a PDF form found at: https://www.annualcreditreport.com/manualRequestForm.action 

The FTC warns against using other sites that claim to provide free credit reports because these are highly likely to be information phishing sites. According to the FTC, you can request all three reports at once or you can order one at a time as needed. You should not contact the companies individually as the central website has been established to make ordering of these reports secure, easy and efficient.

Do All Credit Reports Have The Same Information?

The information you get from each company should be fairly consistent; however, there may be some variations because each company covers a different area, and the focus of each company is slightly different.

Additionally, depending upon your region of residence, your credit check from some of these agencies may only cover the area where you live.

The following video breaks down the difference between credit bureaus (Equifax vs Experian vs TransUnion):​

Another reason for potential discrepancies is that the three credit reporting companies are not public service agencies. They are private, for profit businesses and are in competition with each other, so the information they have is not always consistent from one to the other.

"The combined information gathered by credit reporting agencies makes up the total of your credit history."

It gives a complete (and hopefully accurate) picture of your past and present credit performance. It includes information about your banking habits, your mortgage, credit cards, utility payments and more.

It is not unusual to find errors on your credit report. These may be factual or clerical errors. That's why it's important that you stay on top of these reports and make corrections and revisions as needed.

Identifying And Fixing Problems On Your Credit Report​

The real secret to credit repair is being aware of the information contained in your credit reports. You should read them carefully and challenge inaccuracies quickly with proper documentation.

There are lots of services offering credit repair these days, but the truth is you really don't need a service. According to the FTC, you are actually better off doing it yourself, and your sensitive information is certainly safer the fewer people see it!

Begin by deciding how you want to order your credit reports. You are entitled to a free report from each agency once a year. You could order them all at once, or you could order one every four months to get an overview of your credit status several times a year.

If you apply for a vehicle loan or a credit card and are turned down, you can also get a free copy of your credit report, and you should. This will give you the information you need to determine exactly why you were turned down and rectify the problem.

Reading Your Credit Reports

The information on credit reports is pretty basic, but it can be hard to sort through. Just be patient and persistent, and you will eventually get the hang of it.

One area people often skim is basic identifying information. Take your time and be certain this is absolutely accurate because you don't want to be blamed for credit mistakes made by someone with a name, Social Security Number or other identifying information that is similar to yours! Have nicknames or abbreviations that do not apply to you removed.

All three of the major credit agencies set up their reports in a format that is fairly easy to read. They separate negative entries from positive entries and provide an account summary that gives you an outline of details such as payment histories, balances, limits and currently open accounts.

Negative entries include items such as:

  • Late payments
  • Repossessions
  • Charge-offs
  • Judgments
  • Bankruptcy
  • Tax liens
  • Late child support

Any of these negative items will count strongly against you.

Your reports will also contain an account of your positive credit history. This will primarily be made up of two sorts of accounts. They are:

  1. Revolving Credit Accounts: This is the type of credit account that has an amount limit and requires a minimum monthly payment. The majority of credit cards are revolving accounts.
  2. Installment Accounts: This type of account requires a fixed monthly payment for a given period of time. Personal, student and vehicle loans are installment accounts. Under installment accounts, you will also find mortgage accounts. This is a history of all mortgages and home equity accounts that have ever been in your name.​

In regards to payment history, you may see the following notations:

  • For payments made on time, you may see "0", "OK" or "pays on time, never late".
  • For late payments, you will see the number of days late in rounded numbers indicating a month (30 days), 2 months (60 days), 3 months (90 days) or 120+ meaning four or more months late.
  • Late payments can affect your credit score for as long as 2 years following the delinquency.​

Payments that are 120+ days late may be noted as “charged off “or “placed in collections“. If you have an account that has been placed in collections or sent to a collections agency or bill collector, check to be sure that the bill collector is not adding fees to your balance and then reporting these unpaid fees to the credit bureau. This is illegal!

You may also see items described as being in “universal default” or “closed by credit grantor“. These are both very negative terms because they mean that the company extending the credit decided to close the account for fear of not being paid.

This can happen if your overall credit activity is negative and gives your creditors reason to believe their risk in you is unjustified.

Other Terms You Will Find On Your Credit Reports

Balance designations can be confusing. You will see the term "account balance" and the term "high balance". Account balance is your current balance. High balance is the highest balance you have ever had.

You will also see notations of the date of last activity on your accounts. This is self-explanatory. It is the last time any action occurred on the account.

Who’s Inquiring About My Credit Score And History?

There may also be an "Inquiries" section that provides a list of companies to which you have applied for credit. These are authorized inquiries (aka: hard inquiries).

A hard inquiry is triggered when you apply for a loan or take some other action that causes a company to check your credit with your authorization. This type of inquiry can count negatively on your credit score.

Your report may also provide a list of unauthorized inquiries (aka: soft inquiries). Inquiries from bill collectors seeking to buy and flip your debt for a profit fall under this heading.

This sort of inquiry is also triggered when a company accesses your credit report to see if you would be a good candidate for a pre-approved credit offer. Soft inquiries do not count negatively on your credit rating.

How To Fix Your Credit Report

Because you are checking your credit report for accuracy, you will need to keep thorough and accurate records of your own. As you work on building good credit, establish the habit of keeping receipts, balancing your checkbook and keeping your documents in order.

Credit Report Dispute form

As you read through your credit report, check any entries you are unsure of with a highlighter or red pen.

"If you find errors, you should report them right away."

Once you have completely reviewed the report, compare these questionable entries with your own records.

To do this, you would write a dispute letter for each untrue, negative item and send it in to the bureau that documents that item on its reports. Then request proof of the untrue claim. If the credit bureau cannot provide proof, it must remove the item from your report.

Keep in mind that according to the Fair Credit Reporting Act (FCRA) you are entitled to a credit report that is completely free of errors. Therefore, you should also challenge items that are only partially correct and have them revised to be completely accurate.

How To Build Your Credit Rating

​Once you have recovered from your debt problem, you can begin establishing credit by opening smaller accounts. This is also true if you have no credit history.

You may get offers in the mail for small catalog credit accounts and the like. This type of account usually offers you a small credit limit and charges very high interest, so it's obvious that you would not want to become dependent upon it or use it extensively.

Laura Adams on how to build credit fast:​

Be that as it may, opening a small catalog account, making a single purchase and paying it off promptly can open the door to establishing good credit. You may soon find that you are offered a very low limit credit card or a secured credit card.

Again, accepting and using this type of card very judiciously can help you begin building a good credit rating.

When you begin building or rebuilding your credit, it's very important that you exercise caution and restraint. Don't accept every offer of credit that comes your way. When you begin to show yourself as a good risk, you will get lots of offers in the mail.

Examine each one carefully and don't accept those that have high annual percentage rates, high annual fees and so on.

Don't establish multiple credit obligations. You should never be indebted to more than two creditors at a time. It is simply easier to keep up with payments and to prevent being overwhelmed by interest when you keep your credit purchases to a minimum.

Be very discerning about the type of credit you agree to. When you do commit to a debt, be sure to make your payments on time, and remember that paying more than the minimum will save you money and improve your credit reputation.

Avoid being overwhelmed by interest and penalties charges by making your payments on time and in full.

Continue to order and review your credit reports on a regular basis for any clerical or factual errors they may contain.​

Keep Your Financial House In Order

In addition to paying close attention to your credit purchases and paying them off promptly, you must also take good care of your household bills, mortgage payments and other financial obligations in a timely manner.

Healthy finances don’t just happen. They are the result of good planning and a mature outlook.

Establishing and following the sensible money management techniques presented here will help you establish good credit and financial security.​