A number of factors go into evaluating your credit worthiness. Many of these factors are affected by your length of credit history, or how long you have had credit. The more responsible you are with your credit, and the longer your history of responsible borrowing behavior, the better your credit will be. While there are a few tricks you can employ to help you build credit fast, the best thing you can do is learn how credit scores are determined and behave appropriately.
How Credit Scores Are Determined
Avoid behavior that will penalize you; practice behavior you are awarded for. Your FICO score is determined based on a formula by a company called the Fair Isaac Corp. In determining your score, five factors are evaluated. The first is your payment history--your record of paying your debt. A long history of on-time payments raises this component, which makes up 35 percent of your total credit score. A payment that is 30 days, 60 days or 90 days late lowers this score. Settling debt for less than you owe or selling your home in a short sale also lowers this component. Bankruptcy and foreclosure have the most detrimental effect on your payment history, and stay on your credit report for up to 10 years. The second factor is your borrowing behavior. This makes up 30 percent of your score. When looking at your borrowing behavior, creditors look at how much of your available credit you are using. You are penalized for maxing out your credit cards, and charging up to the maximum amount available. Having a low debt-to-credit ratio (keeping small balances on cards with high limtis) is rewarded. Fifteen percent of your score is made up of the length of your credit history--the longer you have had credit, the higher this score will be. Ten percent of your score is made up of the different types of credit you have--lenders like to see a mix of different types of debt: car loans, mortgages and unsecured debt like credit cards and personal loans. The final 10 percent is determined by how many credit inquiries you have. Each time you open a new account, creditors request, or "pull," your credit report, and this is listed as an inquiry. Too many inquiries can bring down your score because lenders believe that you may be borrowing more than you can pay back.
Apply Your Knowledge
Build your credit quickly by identifying the factors that are keeping your credit score low, and work to resolve those factors. If you have a history of late payments, for example, call your creditors and see if they would be willing to work with you to remove one or several of these late payments from your credit report. Occasionally, creditors will do this as a good-faith gesture to a customer who has improved his behavior and is no longer making late payments. If you owe a lot of money on your credit cards, paying down your debt will help improve your debt-to-credit ratio and raise your score. Call lenders and ask if they will raise your credit limit, but only if they are willing to do it without pulling your credit report. If you do not have credit at all, you should start slowly applying for credit cards and/or loans, charging a small amount each month and paying the balance in full and on time. In time, this responsible behavior will help you build your credit.
Become an Authorized Signer
The single fastest way for anyone to build credit, regardless of her situation, is to become an authorized signer on an account that has positive traits. When you become on authorized signer on someone else's credit card, the data from that credit card is listed on your credit report. This can help your score in a number of ways. If the credit card that you are listed as an authorized signer on is an old account, having that account show up on your report can make your credit history appear longer and improve the age-of-credit component of your score (15 percent). If the credit card has a long history of on-time payments, this can improve your payment history (35 percent). If the credit card has a high credit limit and a low balance, this can improve your debt-to-credit ratio (30 percent). All of these factors can help bring your credit score up quickly. No inquiry is required to become an authorized signer, unlike when you open new credit cards of your own or when you cosign a loan. So you get all of the benefits of this new account, without an inquiry that might lower your score.
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