- In order to build your credit history and build up a good credit score, you need to open some accounts. However, it can be hard to initially get credit if you don't have any history built up. The Federal Trade Commission suggests applying for an account at a local retail store. Local retailers are often more opening to giving credit to people without an established history. Otherwise, you can get a secured credit card to build your credit. You will need to put a deposit into a bank account, and you will get a credit limit equivalent to your deposit.
- Once you have loans or credit accounts, your credit begins to build up immediately. Your creditors will report your payment history to the credit bureaus (Equifax, Transunion and Experian) every month. Each payment you make acts as another building block for your credit. If you maintain a good payment history for a year, you should be able to start opening other accounts. The longer you keep your accounts, the more your credit will build. The Fair Issac Corporation, the originator of the FICO credit score, reports that your credit history length makes up 10 percent of your credit score.
- Once you have taken steps to build up your credit, follow up to make sure it is building as quickly as possible. You are entitled to a free credit report from each of the major bureaus every year if you request it. When you have had your accounts for six months, get a copy of your reports. Make sure all of your creditors are reporting the account information, including your payment history. Prompt, accurate reporting helps your credit build up fast.
- If you have negative information on your credit report, it must be removed after a certain period of time. For example, late payments must be removed after seven years, while bankruptcies come off your report in seven to 10 years, depending on the settlement terms. Once these items are removed, your credit will build up instantly because they will no longer bring down your credit score or be visible to lenders.
- You can build your credit quickly, but you can ruin it just as fast if you stop making payments. According to FICO, 35 percent of your score is made up of your payment history. Every late or missed payment brings down your score. Once you have a bad credit history, it will take at least a year to build it up again.
