How to Build Credit Fast [New Step-by-Step Guide]

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Ever wonder how to save money and how to build credit fast? Learn how to build your credit (and put more money in your pocket) by following my step-by-step guide.

In this article

Key Points

  • A good credit score (670 – 850) will help you save money in the long term
  • Make sure you pay your bills on time
  • Keep your debt balances low (especially on credit cards)
  • Avoid closing unused credit cards

How to Build Credit Fast

Many things define us in our financial lives – but arguably nothing defines us more than our credit and our credit score. 

A credit score (also known as a FICO score) is a 3-digit number typically ranging from 300 to 850. 

Your credit score is reported by 3 different agencies – TransUnion, Experian, and Equifax. 

It’s common that your credit score will fluctuate between the 3 credit reporting agencies – one may indicate your credit score to be 800 while another may reflect your credit score to be 760. That’s OK.

Typically speaking, if you have a FICO score of 670, then most credit rating agencies will say that this score is “good.” 

If you have a Fico score of 800 or over, you’re considered to be “exceptional.”

Why is Credit Important?

Maintaining a high credit score is very important for your future financial endeavors. 

It may not seem like an important number today but your bank accounts will thank you in the future.

the millennial money woman blog post "credit scores explained on a pie chart"

Maintaining or building good credit is extremely important because your financial world will be opened to many more opportunities with a higher credit score. 

Below are some benefits of good credit: 

  • Qualify for favorable car insurance rates
  • Improve your chances for obtaining a job (post background check)
  • Qualify for a wider variety of loans with more favorable terms 
  • Qualify for the best credit cards
  • Qualify for lower interest rates on car loans
  • Qualify for lower interest rates on home loans / refinances

Ultimately, the higher your credit score, the more money you will save – such as by paying a lower interest rate for a car loan.

How is a Credit Score Calculated?

I always found that if I knew how something is calculated, I would better understand how to achieve a successful score – in this case, a FICO score of 800 or more. 

In the case of calculating your credit score, let me tell you that this calculation is a bit complicated: The FICO score you see reported by the 3 credit reporting agencies is derived from a mathematical algorithm.

However, there are some basic variables that factor into calculating your credit score. 

These factors are listed below.

Factor Higher Credit Score Lower Credit Score
Payment History
Paid on Time
Missing pay dates
Length of time your accounts are open
More time
Less time
How much revolving credit (such as credit cards) you typically use
More revolving credit
Less revolving credit
Number of times you open credit cards
Less often
More often
Number of times you close credit cards
Less often
More often
Number of Inquiries
Less inquiries
More inquiries
Credit utilization ratio
Low credit utilization ratio
High credit utilization ratio

As you can see, a variety of factors play into calculating your credit score. 

There is no one-way-fits-all rule, which is why there is a mathematical algorithm to find your credit score.

However, you can clearly see that one of the factors that play into determining your credit score is the length of time you’ve had your accounts open. 

If you are a recent college graduate and are looking to apply for your first apartment without a solid credit history – it may be a difficult feat. 

That’s why I thought it would be important to explain some tips on how to build credit fast, which I’ve explained further below. 

the millennial money woman blog post "how to build your credit score fast"

How to Build Your Credit Score Fast

Building your credit score is one of the easiest ways for your wallet to thank you later. 

To be very honest, rebuilding your credit score is pretty simple. 

Below I’ve compiled a step-by-step guide for you to better understand the strategies to build your credit score fast. 

Step-by-Step Guide to Build your Credit Score Fast:

  • Start Early
  • Pay all Bills on Time
  • Pay off Debt
  • Maintain Low Credit Card Balances
  • Increase Credit Limits
  • Open New Credit Accounts Only if Necessary
  • Avoid Closing Unused Credit Cards
  • Avoid Multiple Credit Inquiries
  • Review Credit Reports and Dispute Errors 

Step #1: Start Early

I say this from personal experience: start building your credit early – as early as possible. 

If I had known about this, I would have probably received a lower interest rate on my initial home loan (before refinancing). 

However, I started building credit when I was 21. 

I received my first credit card just out of college, and it was a struggle to get my first apartment. 

To build credit, you don’t need a credit card. 

If I was 18 or 19 again (which is the age I wished I started to build my credit), I would have applied to a store credit card: such as Macy’s or Best Buy, or Walmart. You get the point.

Store credit cards are easy for you to obtain (even if you have no credit), and they are a great way to begin your credit history. 

Note, I’m not saying to go out to Macy’s and buy $500 worth of clothes every month to build your credit. 

But I am saying to open a store credit card at a store you would have to regularly purchase items anyway. 

For example, if you find yourself regularly shopping at Walmart, then I would say it might be time to apply to a Walmart Credit Card. 

You’ll need to use this store card one way or another – because you go to Walmart anyway to buy groceries, food, school supplies, etc. 

The only difference here is that you’re using the store card to begin building your credit history and proving to future lenders that you are responsible enough to pay off your store card debt within a reasonable amount of time.

Step #2: Pay all Bills on Time

Segueing into the next topic: It’s very important to pay your bills on time – and pay all bills.

Likely one of the first things potential lenders do is review whether you’ve paid your bills on time – in other words: How reliable are you?

If they find that you’ve had several missed bill payments, you are considered less reliable – which means you are a greater risk for the potential lender to default on your loan payment. 

This means the lender is less likely to see their money back from you, so the lender will either decline your loan application or the lender will accept your loan application but charge you a high-interest rate because you are considered “a riskier investment.”

When I say pay all bills on time, I mean pay ALL bills on time – not just credit card bills. 

Missed or late payments will remain on your credit report for at least 7 years and they will have a negative impact on your credit score.

Step #3: Pay off Debt

Not only will paying off debt help maintain your peace of mind and help you 
save more money because you’re not paying interest rates, but paying off debt will also improve your credit score.

Paying off your debt will improve your credit score because you are maintaining a low credit utilization ratio.

If you maintain a low credit utilization ratio, your lenders will see that you can manage your credit well and that you are not an impulsive spender who is unable to pay back what they owe.

Step #4: Maintain Low Credit Card Balances

This step to building your credit score fast is similar to Step 3 – paying off debt. 

Maintaining low credit card balances will help you maintain a low credit utilization ratio. 

As a reminder, the lower your credit utilization ratio, the more favorable you will look in the eyes of potential lenders. 

I heard someone once mention that your credit score and credit utilization ratio will be positively impacted if you leave $100 of debt on your credit card and pay off the rest. 


Make sure you always pay off whatever is on your credit card.

Recommended reading: How to eliminate credit card debt

Step #5: Increase Credit Limits

Let’s say you are having trouble maintaining a low credit utilization ratio. 

Let’s say your credit utilization ratio is 40% – where you have a credit limit of $10,000 and a current outstanding balance of $4,000. $4,000 divided by $10,000 = 40%.

However, lenders want to see a credit utilization ratio of 30% or lower. 

What’s a fast way to lower your credit utilization ratio? 

By calling up your credit card companies and requesting a credit limit increase

The key here is to increase your credit limit while maintaining or lowering your debt balance, causing your credit utilization ratio to be lowered instantly. 

Using the example above, to drop your credit utilization ratio to 30% or lower, you can increase your current credit limit of $10,000 to $16,000 all while maintaining the same balance of $4,000. 

Now you’ll have a 25% credit utilization ratio, which instantly stands in your favor.

Step #6: Open New Credit Accounts Only if Necessary

Opening more accounts just for the sake of having additional access to money during an emergency is not going to help your credit score. 

(Remember credit cards or any other type of credit is NOT an emergency savings fund).

In fact, opening unnecessary credit accounts will likely harm your credit score. 

One of the main reasons why your credit score will be lowered is due to the increased number of credit inquiries

Another reason why it may not be in your best interest to open a new credit account for no specific reason is because it could tempt you to accumulate more debt. 

That depends on your personality type and whether you trust yourself with more spending power.

Step #7: Avoid Closing Unused Credit Cards

Closing an unused credit card may mean several things. 

First, it will mean that you will lose the credit card’s credit limit (which means your credit utilization ratio will likely increase drastically). 

Second, You’ll lose your credit history – if you’ve paid your bills on time on this one credit card, you’ll lose that good payment history that counted toward your credit score. 

Third, you’ll also lose the length of time you’ve had that credit card account open. 

Let’s take a further look into the credit utilization aspect. Remember, lenders prefer you to have about a 30% credit utilization ratio. 

Let’s say you have the following inputs:

credit score scenario 1

Now, let’s say that you decide to close your unused credit card. 

Keep in mind that your unused credit card has a limit of $7,000.

credit score scenario 2

I know it’s tempting to close unused credit cards (I was about to close 2 unused credit cards myself recently – but I resisted). 

Just remember some reasons why closing unused credit cards may ruin or at minimum decrease your credit score.

Step #8: Avoid Multiple Credit Inquiries

Now that we’ve talked about increasing your credit utilization ratio by potentially applying to another credit card – I want to make sure I stress 1 point: Be aware of the number of hard credit inquiries on your record. 

Too many (typically up to 6) hard inquiries are not good for 2 reasons.

  • Your credit score decreases
  • Your potential lenders will likely not approve of your loan request
how to review credit reports and dispute errors

Review Credit Reports and Dispute Errors


Step #1: Order free annual credit report 

This may take up to 15 days. Keep in mind your credit report will be mailed to you.

Step #2: Review thoroughly 

Make sure your credit report is accurate.

Step #3: Dispute errors

If you find errors, make sure you submit your dispute to the credit reporting agencies.

Step #4: Investigation

The 3 credit reporting agencies will have 30 days (sometimes 45 days) to investigate your dispute.

Step #5: Notification of error 

The credit reporting agencies will have 5 business days after closing their investigation to report the results to you.

Step #6: Free updated report

You are entitled to a free, updated credit report with your disputed changes.

The best way to monitor your credit score is to monitor your credit report

Remember that you are entitled to 1 free credit report every 12 months from the 3 credit reporting agencies.

You can order your free credit report 2 ways:

If you do find an error on your credit report and report that error to the credit reporting companies (ExperianTransUnion and Equifax) then these 3 credit reporting agencies must investigate the alleged errors within 30 days of you reporting the errors. 

The investigation may take up to 45 days.

Moreover, if the credit reporting agencies do find an error, they have 5 business days after closing their investigation to inform you of the results. 

After correcting the credit report, you will also be entitled to a free report, reflecting the changes. 

This free updated report does not count toward your 1 per year free annual credit report.

I can’t stress enough to review your credit reports. 

I had a friend who decided to review her free annual credit report and found out that someone had opened a credit card using her name. 

After reporting that to the credit agencies, the erroneous account was shut down. 

Trust me, this step will help your financial picture.

Closing Thoughts

Although having credit to spend money may be a lovely luxury – it can also be tempting treachery. 

Make sure you understand your personality and your relationship with money (ie – do you spend every penny you have access to?) before increasing your credit limit or before applying to store cards to build credit, for example. 

I wish I had known about the techniques and strategies to build credit fast when I was 18 or 19 years old. 

If that was the case, I would have added another 3 or 4 years to my credit history and my credit score would have likely improved quite drastically over where it is now. 

Remember to do your research before blindly applying to credit cards to build and establish your credit score.

A great credit score can and likely will open many doors for you that were previously closed. 

Moreover, a good credit score can also save you thousands if not tens of thousands of dollars down the road because you’ll have access to better interest rates. 

The single worst thing you can do today is to carry heavy credit card balances, paying bills late, and not starting the steps to building your credit score. 

As with most things, building a proper credit score will take time. 

Today is a great day to start and build your credit. 

Your bank accounts will thank me later!

What are some strategies you have employed to build your credit score?

Fiona Smith
Fiona Smith
Fiona Smith is the founder of The Millennial Money Woman. She holds her Master of Science Degree in Personal Financial Planning, has advised decamillionaires for 6 years in the corporate wealth management sector and has co-founded a local non-profit community teaching financial literacy. She is the author of the personal finance book How to Get Rich from Nothing and her work is featured on Forbes and FinCon.

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