Building Credit Takes Time

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Building credit can be tough if you have little or no track record in financial matters. The first thing lenders want to know when you ask for a loan or credit card is what sort of financial track record you have, and they will evaluate your credit report or credit score to scrutinize your past. How can you build credit if you have no credit? If you have little credit history, it can make it hard or nearly impossible to obtain a loan.

Below are some tips that could help you on the path to building a solid financial record.

Acquire a collateral-backed credit card. A secured card is one that has a limit that is backed by a cash deposit. Be sure that your bank will give documentation about the card and your use of it to the credit reporting agencies. Secured charge cards have a tendency to have higher fees and interest rates than unsecured cards; you don't want to use one if it isn't going to help you in any way. The risk to the bank is minimal, as they have your money on hand in the event that you fail to pay. A card with a limit of as little as $100 could be effective if you use it regularly and pay your bill in full each month.

Check your credit report. You can get a copy of your credit report for nothing at annualcreditreport.com. Make sure that the information on the report is correct, and watch out for errors. Financial authorities estimate that nearly a quarter of all credit reports have mistakes; if you have another person's debt listed in your name it could hurt your ability to obtain a loan for a long time.

Be patient. You should use your checking account and secured credit card for a year or so, making regular payments. Eventually, you will build a credit score that should earn you the ability to get better credit card accounts and bank loans. Waiting can be difficult, but creating any type of credit score takes time.

Open a checking and a savings account. Make a practice of using your bank accounts on a regular basis by saving money for a rainy day and by paying your bills by check. It is a modest start, but these are business transactions and they will help you build a credit score. Be aware that writing bad checks will defeat the purpose of having the account, so use the account responsibly.

Establishing credit takes some time and effort, but it is well worth it.