5 Ways to Build Up Credit
Key takeaways:
Your credit summarizes your financial behavior and payment history.
You need credit for many of life’s major financial milestones, such as taking out a loan, accessing lines of credit or credit cards, or renting an apartment.
Making regular payments on existing debt, diversifying your credit mix, and reducing your credit utilization can help you build credit, even if you have a low credit score or no credit history at all.
Credit is an essential part of you financial life. But many people don’t know why it’s so important—or how to build good credit. Don’t believe those advertisements promising to fix your credit quickly. The path to better credit takes time and patience, no matter where you are in your financial journey. Luckily, we’re here to help.
This guide breaks down credit and its potential impact on your life. You’ll also find 5 tips to boost your credit, plus our favorite credit-building best practices to create a healthier financial future.
What is Credit?
Credit refers to the ability to borrow money or access goods and services with the promise to repay in the future. It serves as a measure of your financial reputation and is based on your financial habits and behavior. A good credit record, characterized by timely bill payments and responsible borrowing, results in a higher credit score. Poor credit, on the other hand, is associated with missed payments and defaults.
Why is it important?
Building and maintaining credit is important for financial stability. It enables you to secure loans, qualify for credit cards, and even impact job prospects. A good credit score indicates lower risk to lenders, increasing the likelihood of obtaining credit and achieving financial goals. Additionally, it can save you money through lower interest rates. Conversely, bad credit makes it challenging to borrow money for major purchases and results in higher interest expenses.
How long does it take?
It is possible to build a good credit score relatively quickly. stablishing credit involves having an active credit account for 6 months and having creditors report your activity to the credit bureaus. However, building credit to a "good" or "excellent" level may take several years, while credit repair is a time-consuming process but ultimately worthwhile.
Quantifi Lending (“QLI”) reports to Credit to both Equifax and Transunion, helping its customers build or reestablish their credit as fast as possible.
5 Ways Build Credit:
Prioritize on-time payments: Pay your bills on time and make at least the minimum payment to avoid late fees. Consider debt consolidation if you're struggling with multiple payments.
Keep your credit utilization rate low: Aim to keep your credit card balances below 30% of your limits. Lower balances are even better for improving your credit score.
Keep your credit accounts open: Unless there's a compelling reason, it's generally better to keep your credit card and bank accounts open. Closing accounts can negatively impact your credit utilization and average account age.
Spread out your credit account applications: Avoid applying for multiple credit accounts within a short period as it can lower your credit score. Space out applications over about 6 months or combine them within a 2-week window.
Diversify your credit mix: Have different types of credit accounts to demonstrate your ability to handle various debts. Prequalify to reduce hard credit inquiries and consider affordable options like personal loans or credit-builder loans to vary your credit mix
Ready to start building credit? Quantifi Lending may be able to help
QLI is committed to being a partner in helping to build and establish your credit to help you flourish in your financial life. QLI aims to fit the right loan to meet your financial needs put you on the path to achieving your goals!