Credit Building Blocks

The only thing worse than having a damaged credit history is not having one at all. It's a catch-22. You apply for a credit card to build up your credit history. The lender checks your credit report. It's blank. This makes you an unknown risk. The lender refuses your application, leaving you worse off than when you started.

If you want to build up your credit history from scratch, you have to start small. Apply for a store card. These are easier to get than regular credit cards. Use the store card for a few months. Make sure you make all of your payments on time. The card issuer reports your repayment history to the credit bureaus once a month. After a few months, you should have some data on your credit report.

The next step is to apply for a credit card. Start off with a basic MasterCard or Visa. You do not need a platinum card. A good place to apply is at the bank that holds your checking account. You already have a debit card with them, so they're more likely to approve the credit card application.

Once you have the credit card, use it on a regular basis to build up your credit history. Set up an automatic monthly transfer from your checking account so you never miss a payment. Even if you're only a day late, it will reflect negatively on your credit score.

As long as you use your credit card, your credit history will grow. After a few months, you can start applying for more credit cards and other types of credit. Space out the applications. Lenders get suspicious if you apply for too much credit at once.

Building up a credit history does not have to mean building up debt. If you pay your balance in full every month, your credit score will rise, and you will not accumulate any debt.