Credit Building Tips

How to Build Credit History Faster Than Usual

Shaun Connell
August 25, 2023

When you want to take out a loan or get a new credit card, lenders will look at your credit history to determine your creditworthiness. If you have a thin or non-existent credit history, you might be wondering how you can build a credit history faster than usual.

The best way to think of your credit history is as a record of all of your credit activity. This includes how many credit accounts you have, whether you have a history of on-time payments, and how much debt you have. Additionally, one of the factors that influences your credit score is the age of your credit accounts.

Solution icon If you're trying to beat the calendar and build credit history faster than is typical, there are two primary things you can do: become an authorized user on an old, well-established account or use a third-party service to add on-time rent and utilities to your credit report.

When neither of these is an option, and you have a thin credit profile, you might consider applying for a secured card, a credit builder loan, or a store credit card. In this article, we'll look at what you need to know about building your credit history to help you achieve your financial goals.

What Is Credit History?

Your credit history is the record of how you have managed your finances and debt over time. Essentially, this is an account of how able you have been to repay the debts you have. This shows up on your credit report, which recounts the number and types of credit accounts you have held.

older man with well established credit history building credit faster than usual

The following information is recorded in your credit report about your credit accounts:

  • How long each account has been open
  • The amount of money you owe on each account
  • How much credit did you use compared to your available credit
  • Whether you have made your payments by the due day
  • How many recent credit inquiries have occurred on your account

Credit reports also include information about any collections, liens, judgments, or bankruptcies.

All consumers can access their own credit history through their credit reports. Typically, you can receive a free credit report from all three of the credit reporting agencies through once a year. However, due to the economic uncertainty that resulted from the pandemic, consumers can access free credit reports weekly through December 2023.

Why Does Your Credit History Matter?

Your credit history is important because potential creditors will use this information to determine whether they are willing to extend credit to you. This includes creditors such as credit card issuers and mortgage lenders.

woman with phone and credit card building credit faster than usual

Beyond that, the information in your credit history is also used to determine your credit scores. Here are some of the situations where your credit history might come into play:

  • Lenders and creditors will look at your credit report and history to determine whether you qualify for a loan. Furthermore, they will use this information to set loan terms like interest rates, monthly payments, and credit limits.
  • Landlords might take a look at your credit when you are applying for an apartment.
  • Insurance companies can use the information found in your credit history when they are determining what insurance rates to offer you.
  • Utility companies might use your credit history when you open an account with them. This information is used to determine whether or not you will be required to pay a security deposit.
  • Prospective employers can take a look at your credit history and reports before they decide whether or not to hire you.

What Does It Mean to Have a Good Credit History?

If you have a good credit history, it means that you have demonstrated that you routinely pay your bills on time and are not saddled with large amounts of debt. To potential creditors, a good credit history means that you are a lower-risk borrower.

Having a good credit history means you have a history of making on-time payments and maintaining low debt balances.

This means that it's easy to be approved when you apply for loans. On top of that, it means you'll be offered lower interest rates for the loans and credit you're approved for.

What Does It Mean to Have a Bad Credit History?

On the other hand, having a bad credit history means that you are carrying a lot of outstanding debt and don't regularly pay your bills on time.

Having a bad credit history means having a history of missed or late payments, carrying large balances, or struggling with significant financial events like bankruptcies, collections, or liens.

man with bankruptcy on credit report with bad credit history

There are a number of different factors that can contribute to a bad credit history. These include:

  • Excessive credit card usage
  • Missed or late payments
  • Applying for a number of credit or loans in a short period of time
  • Dealing with significant financial events such as charge-offs, settled accounts, foreclosure, and bankruptcy

When you have a bad credit history, it can make it hard to be approved for credit cards or take out loans. Beyond that, the loans and cards you are offered will typically mean dealing with high-interest rates. If your credit history doesn't show you have been a responsible borrower, it can also mean that you have to pay security deposits for things like car rentals, apartments, and cell phones. To make matters even worse, you'll also find your car insurance premiums are higher than if you have a good credit history.

Why Is a Short Credit History a Bad Thing?

Even if you have been exceptionally financially responsible for your entire life, having a short or nonexistent credit history can make it very difficult to qualify for loans or lines of credit.

This is because your credit history is an important part of how lenders can trust that you are a responsible borrower. When your credit history is brief or doesn't exist at all, lenders don't have as much information as they typically want to make a decision about loaning you money.

How Does My Credit History Impact My Credit Score?

The length of time that the accounts on your credit reports have been open is one of the factors that impact your credit scores. You can check the length of your credit history by taking a look at your credit report.

The length of your credit history is worth about 20% of your VantageScore credit score and 15% of your FICO Score credit score.

There are three primary factors that go into calculating the length of credit history category within your FICO credit score:

  1. The length of time your various credit accounts have been open, including the age of your oldest account, the age of your newest account, and the average age of your accounts altogether
  2. The length of time that each individual account has been open
  3. The length of time that has passed since you last used your credit accounts

The older your credit history is, the better when it comes to your credit score.

How Do Lenders Use Your Credit History?

When lenders are reviewing loan applications, they'll take a close look at your credit history. The longer your credit history is, the lower risk you appear as a borrower, so long as that history displays on-time payments and responsible credit usage.

Beyond using your credit history to determine whether or not to approve your application, lenders use your credit history for two purposes:

  1. Setting your interest rates: Your interest rate is the amount of money you are charged for taking out the loan by the lender. This is based on a percentage of the principal loan amount.
  2. Setting your loan terms: The terms of your loan include the length of the repayment period (for example, a 36-month car loan or a 30-year mortgage,) fees you will be charged, the minimum monthly payment you will owe, and more.

As mentioned above, your credit history can also be used by employers, insurance companies, landlords, and utility companies to make a more informed decision about you.

How Long Should My Credit History Be?

According to a study from FICO, one of the major credit scoring model companies, people who have exceptional credit scores (think 800 or higher) have an average credit age of a little over ten and a half years.

That being said, you don't need to have had credit accounts open for more than a decade to have good credit. You can receive a FICO credit score once you have at least one credit account on your credit report for roughly six months. During this period, the payment history needs to have been updated at least once to be eligible for a FICO score.

For a VantageScore credit score, your account might only need to be on your credit report for a month or two in order to qualify.

It's worth noting, though, that other information can have a bigger impact on your credit score than simply having a thin credit file or a young credit report. For this reason, the biggest priority should be avoiding missed or late payments and keeping a low balance on your cards in relation to your credit limit.

How to Build Credit History Faster Than Usual

Most people simply exert some patience when it comes to building credit history. As they continue to make payments on time and keep their accounts in good standing, the average age of their credit will typically start increasing over time.

However, if you're motivated to build a credit history faster than is typical, there are a few things you can do. These include:

  • Become an authorized user on someone else's account
  • Add alternative data to your credit report
  • Don't close old accounts, if possible
  • Be wary of opening unnecessary new accounts

Let's take a closer look at why each of these steps can help you build credit history faster than usual.

Become an Authorized User on Someone Else's Account

In a recent post, I discussed at length how you can build credit by becoming an authorized user on someone else's account. If you have a thin or non-existent credit history, this can really give you a leg up when it comes to the length of credit history used to calculate your credit score.

There are a few things to keep in mind before you run out looking for someone to add you as an authorized user, though.

First of all, you want to make sure that the credit card issuer actually reports authorized users to the credit bureaus and not just the primary account holder. If they don't also report authorized users, being added to their account won't do your credit report any good.

Secondly, you'll want to be very certain that the rest of the account's credit history is positive before you're added as an authorized user. In particular, you should verify that the payment history and credit utilization on the account are positive before becoming an authorized user.

Add Alternative Data to Your Credit Report

Another tactic you can use to increase the length of your credit history faster than usual is to add alternative data to your credit report.

Your credit report often won't display things like mobile phone bills, rent payments, or utility bills. If you haven't had a credit card or taken out any loans, this can mean that you have little to no credit history even though you've been responsibly paying bills for years.

In order to potentially add years to your credit history, you might consider using a third-party service that will add eligible accounts to one or more of your credit reports if you are adding eligible accounts. That has been open for several years. This can give you a real leg up when it comes to increasing the length of your credit history.

Adding Rental Payments to Your Credit Report

If you want to add your rent to your credit report, here are some of the paid third-party services you can use:

  • Rent Reporters
  • Rental Kharma
  • LevelCredit
  • Rock the Score
  • PaymentReport
  • Boom

All of the above services can be initiated by renters.

There are additional services that can be used if property managers or landlords are willing to opt in. In some cases, renters might actually be enrolled automatically when they rent a new place. If you're currently moving, you can ask your new landlord whether or not they use any of the following services, many of which are typically free for renters:

  • ClearNow
  • Azibo
  • Esusu
  • PayYourRent
  • Jetty Credit
  • Rent Dynamics
  • Bilt Rewards

Adding Utility Bills to Your Credit Report

Utility providers usually aren't required to report payment histories to the three primary credit bureaus in most states. This means that you will usually only see a utility account on your credit report if the account is delinquent.

There are a number of reasons that utility companies are disincentivized from reporting to the credit bureaus, with the two primary reasons being:

  1. It's costly to the utility company
  2. It makes them subject to the Fair Credit Reporting Act

If you want your history of on-time utility payments to contribute to your credit history, there are a few services you can use:

  • Experian Boost: Adds utility, phone, rent, and streaming payments to add on-time qualifying payments to your Experian credit report
  • TransUnion eCredable Lift: Adds payment data from various utility accounts (including electric, gas, cable, internet, phone, satellite TV, garbage and waste disposal services, and water and sewer) to your TransUnion credit report
  • LevelCredit: You can have your electric, gas, water, cell phone, and rent payments reported every month to all three major credit bureaus using LevelCredit.

Don't Close Old Accounts

Closing a credit card can end up damaging your credit for two primary reasons:

  1. It can shorten the length of your credit history once the account falls off your report, which can impact your credit score and make you appear less trustworthy as a borrower to lenders.
  2. It can increase your credit utilization ratio by reducing the total amount of credit you have access to.

At the same time, it's important not to blindly follow the commonly spouted advice that you shouldn't ever close your credit accounts.

Why You Might Want to Close an Old Account

There are several very good reasons why you might want to close an account that might outweigh the negatives, including:

  • Getting separated or divorced: If you're getting separated or divorced, it's likely a good idea to close joint credit card accounts. If you don't close these accounts, you can end up on the hook for charges that are made to the account. Even if your divorce decree states that your ex has to pay back the debt they have racked up, you are still technically obligated to pay the debt back to the lender. To make matters worse, it is certainly not unheard of for disgruntled spouses to rack up excessive balances out of revenge or spite during a divorce.
  • Dealing with high annual fees: If you have a card you don't use that has high annual fees, it might simply make sense to cancel the card. Before you cancel the account, though, it's worth calling the issuer and letting them know you're considering canceling because of the high fees. You might find that they are willing to waive the fees if you keep the account open.
  • Struggling with spending problems: Finally, some people simply can't deal with the temptation of having available credit on their cards. When they have access to credit, they use it. This can create an endless cycle of debt that is truly crushing, and those who are trying to curb a spending habit might determine it is well worth closing a credit account.

All that being said if the only reason you're considering closing an account is that you don't particularly need it, stop and think about whether or not you should keep it open for the sake of your credit history.

Don't Open New Accounts You Don't Need

On top of being wary of closing old accounts, you also want to be thoughtful before opening a new account. The reason for this is that it can reduce the average age of your credit.

Of course, credit age is only one of many factors that impact your credit score. If you are primarily concerned with increasing your credit, it's possible that opening a new account will ultimately help more than it hurts by increasing your total credit limit and reducing your credit utilization ratio. It's worth noting, though, that the hard pull the creditor will run when approving you for a new card can temporarily reduce your credit score.

How to Build Credit When You Don't Have Any

Starting from scratch with credit can feel pretty frustrating. On the one hand, you need credit accounts in order to build credit. On the other, lenders and creditors likely won't extend credit to you or offer you loans when you don't have a credit history.

Luckily, there are a number of things you can do to break free from this conundrum. Here are some options:

  • Become an authorized user on an account with an old, established credit history
  • Apply for a secured credit card
  • Utilize a third-party service to add monthly utility, cell phone, and rent payments to your credit report.
  • Take out a credit builder loan
  • Apply for a store card

Building Credit History: Final Thoughts

If you're just opening your first credit card account right now, it can be frustrating to realize just how long it takes to build good credit history. However, there are a few things you can do to increase the age of your credit accounts on your credit reports. The two primary things you can do are:

  • Become an authorized user on an old, well-established account
  • Add rent, utilities, and cell phone payments to your credit report using a third-party service

If neither of these are options and you have yet to establish any credit, here are some things you can do to start building credit in addition to becoming an authorized user or adding rent and utilities to your report:

  • Take out a credit builder loan
  • Apply for a secured credit card
  • Apply for a store credit card

Are you working to boost your financial literacy and ensure your credit allows you as many opportunities as possible down the road? Make sure you check out our Credit Building Tips blog for more useful resources.

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Written By:
Shaun Connell
Shaun Connell is a personal finance and credit expert with a passion for helping individuals eliminate debt and improve their credit. He's enjoyed writing investing and financial content for over 15 years, with expertise in real estate, debt, banking, credit, and wealth building. His work has been seen by millions on the web.

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