Help to Build Credit

Some people have no credit history, making it difficult to get started in the credit game. Other consumers may have poor credit but want to build credit in order to land a better credit score. Learning options for building credit can help you decide which credit solutions work best in your situation. Building credit isn't difficult; it does take patience and careful financial planning.

Establish Baseline

Consumers with poor credit need to establish their current financial baseline in order to build better credit. Start by running a credit report to confirm or contest open accounts, account balances and payment history (see Resources). Make a list of all outstanding debts, including credit card balances and interest rates. Set a monthly spending budget, directing as much money as possible toward debt balances. Steady payments will reduce overall debt, helping to build a better credit score.

'Starter' Credit

It's tough to get credit when you don't have a credit history; lenders have no guidelines for determining the likelihood that you'll repay credit used. However, "starter" credit cards can help you begin building credit, eventually transitioning to traditional credit cards and installment loans. Examples include department store credit cards, gas company credit cards and secured credit cards. Because department store or gas company credit cards tend to have lower balance limits compared with traditional credit cards, the risk of doing business with you is reduced for lenders, making it easier to score cards. Secured credit cards require consumers to deposit a specified amount of money in the issuing bank, ensuring access to repayment funds should you become unwilling or unable to pay credit card balances. Since risk is reduced, it's easier to obtain the card.

Payment Habits

Payment habits represent a slow but sure way to build credit. Your credit history and score includes whether you make payments on time, pay the balance in full or pay just the minimum each month. Missed payments or unpaid balances turned over to collection agencies can harm your credit. Consistent payment habits can help to build better credit over time by demonstrating that you're able to manage accounts.

Use Credit

It takes credit to build credit, so once you land that first secured credit card or department store credit card it becomes your job to use it -- wisely. Using your credit card regularly to make purchases and then pay the balance in full each month is an effective way to build credit. Unused credit can actually hurt your credit score if the issuer decides to close the account. You're not penalized for the closure if the balance is zero, but the reduced available credit could hurt your debt-to-income ratio and the length of your history could be shortened if your other credit accounts were opened much more recently.