Use a Credit Card to Build Your Credit History Fast

You are probably aware that your credit history is an important part of your financial well-being.

Indeed, your credit history impacts what you pay for loans — and whether you get them in the first place.

Your credit history can also affect your insurance premiums, employment prospects, and even what happens when you try to sign up for cell phone service.

Many people want to know how they can establish a credit history quickly.  It’s true that it can take years and years to build a solid financial reputation.  But, if you want to kickstart your credit history, a credit card is probably the fastest way to do so.

Immediate Impact on Your Credit

A credit card has an immediate impact on your credit.

This is because every time you swipe your credit card, you are taking out a loan.  Every month, the results of your credit card use are reported to the credit bureaus.  So, if you use your credit card, and then make a payment on time, it is reported quite quickly, and you already of positive information on your credit report.

Your credit report is updated regularly, and your credit card issuer provides a great deal of usable data on your habits.  Your credit utilization, whether or not you pay on time, whether you have gone over the limit, and how long you have had your credit card account are all items that are reported in your credit history, and factored into your credit score.

As you can imagine, having so much data available, and on such a regular basis, makes a big difference.  Using your credit card has an immediate impact on your credit rating, for better or for worse.

Watch Out for the Negative Impact

building credit with a credit card brick by brick

Building up your credit with a credit card takes a solid foundation in order to build a solid credit history.

Because credit cards have such an immediate influence on your credit history and score, many people use them to quickly establish a financial reputation.

If you are looking to get a small installment loan, having an established credit history — thanks to credit cards — can be a good way to get started.

However, you do need to be aware of the dark side of credit cards.

Your credit history can be built quickly with the help of credit cards, creating a positive financial picture.  The flip side, though, is that the immediate impact on your credit can also be negative.

If you are irresponsible with your credit card usage, things can get ugly quickly.  Just as you can build a good credit history quickly with the help of savvy credit card use, you can also destroy your credit quickly.

And, once you have a bad credit score, it can be difficult to fight back from that — even with the help of responsible credit card use.

Here’s What Using Your Credit Card to Build Credit Fast Boils Down To

It’s important to remember that there are two sides to every coin.

Credit card use offers a fast way to establish your credit situation.  However, it establishes a negative situation just as fast as it establishes a positive situation.

How you use your card is up to you.  Make sure you use your credit card wisely and you can build up a positive credit history.  You don’t have to go crazy and charge everything you plan to buy.  Even a small recurring charge can work towards building great credit.  But all it takes is some late charges and maxing your credit to keep your score low.

Before you apply for a credit card, make sure you have a plan for smart, responsible credit card use.



Published or updated October 15, 2012.

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