How to Rapidly Build Credit

To get the lowest interest rates on an unsecured credit card or on a loan for a car or home, you must have a healthy credit score--typically 700 or above. If you've never used credit, prospective lenders have no history on which to gauge your trustworthiness in paying back debt; in fact, the length of time you've been using credit weighs in at 15 percent of your overall credit rating. The Consumer Federation of America and Fair Isaac Corp. say that you can quickly get a high credit score in a short length of time, as long as you manage what credit you have appropriately.

Instructions

Build Good Credit Quickly

1

Open a checking or savings account at a bank, advises MSN Money's Liz Pulliam Weston. When you apply for credit or a loan, your prospective lenders will take this as a sign that you're financially responsible.

2

Obtain a secured credit card. This type of credit card requires you to make a deposit with the credit card issuer that's used as collateral. Your credit line will be at or close to the amount of your deposit. Weston states that a good secured card has no application fee, a low annual fee and converts to a regular unsecured credit card after a certain period of time--usually 12 to 18 months. But be sure that the credit card issuer reports to the three credit bureaus; otherwise, you won't build credit.

3

Manage your secured credit card appropriately. The CFA and Fair Isaac stress the importance of making monthly payments on time every month and keeping the percentage of your revolving utilization low, which means sticking with modest account balances. These two factors together comprise 65 percent of your credit score. What's a low balance? Your revolving utilization is determined by the following formula: Your total balance charged to the card, divided by your credit limit. To build good credit quickly, your revolving utilization should stay at or below 10 percent, according to Credit.com.

4

As an alternative to a secured credit card, piggy-back on the good credit of a spouse or trusted family member. You can be added as a joint account holder on their account or get them to co-sign a loan with you. Weston urges you to tread carefully when using this "shared liability" method of building credit. If you default on a loan or credit card, the other party's credit scores take a hit--and vice-versa.

5

Check your progress before applying for a major loan or other credit. You can get a copy of your free credit reports once a year through AnnualCreditReport.com, the official website maintained by the three nationwide credit bureaus: Experian, Equifax and TransUnion. These reports don't include your credit scores; however, you can purchase all three for around $30 when you order your credit reports.