Certain types of people have more problems in this area than others. Generally, young people just starting their careers, older people who've always paid cash, and divorced or widowed women and immigrants to the United States tend to have more problems than others. There often is no credit history for them.
The first thing to do is to find out what's in your credit file and credit history. Sometimes errors can be reported in your credit history or there can be some reports that you didn't realize would show up or that you had forgotten were there. Make sure, if you've had a different name or lived in a different location, that those past records were merged with your current record. Also, if you shared accounts with a former spouse, ask the credit bureau to list these accounts under your name as well. Many will perform these services for a small fee.
Remember that creditors are not required to report any account history information to the credit bureaus. However, if you have a joint account and the creditor does report it - it must be reported under both your names under the Equal Credit Opportunity Act. The best way to make sure this is done is to contact your creditor in writing (make sure to include account numbers and keep a copy).
If you do not have a credit history (or have a sparse one), you should start to work on one immediately. First, you must have a steady income and should live in the same area for at least a year. Then you can try applying for credit with a local department store or applying for a small loan amount from your bank. Often a local department store or bank will approve credit applications when larger ones will reject them due to a lack of credit history. Most importantly, before you apply, ask if they report credit history information to credit bureaus. If at all possible, you should strive to obtain credit that will be reported, as this will build your credit history.
If you are rejected ask for the reason why. There are often other reasons for a denial than lack of a credit history. For instance, your income may not meet the minimum or you may not have worked at your current job long enough. You can usually solve these problems with time or by simply applying with another creditor. In almost all cases, it is best to wait at least 6 months before making each new application because credit bureaus record every inquiry about you and inquiries can damage your credit by making it look like you are trying to obtain too much credit too quickly.
If you still are having problems developing credit, you may want to ask a person who has an established credit history to act as your cosigner. A cosigner guarantees that you'll pay and that if you don't - they will. This makes you look like a better risk for creditors. Once you have paid off this debt, try again to get credit on your own.
Specific Ways to Build Credit
It is actually pretty easy to build credit. Try one of the following ideas:
* Ask your bank or credit union about a secured credit card. You can make a deposit to your account and have a credit limit in the amount of your deposit. The bank takes little risk and you build credit slowly.
* Use a co-signer on your first few credit accounts. Lenders will consider the co-signer’s existing credit. The co-signer essentially ‘vouches’ for you while you build credit. Note that this is a big responsibility – you can cause major headaches for the co-signer if you don’t pay as agreed (see our page on How Co-Signing Works for details).
* Use retailer programs for modestly large purchases like furniture. For example, you may buy a television on the “$40/Month Payment Plan”. Gas station cards may work as well. These programs can be easier to qualify for and they certainly help you build credit. Be sure that the retailer will report your loan to the major credit reporting companies.
* Get a credit card with any reputable institution that will give you one. Again, you have to make sure they’ll report your timely payments to the credit reporting companies. Of course, you have to always pay at least the minimum before the due date.