Editorial Policy

Building credit takes time, patience

Erica Sandberg

January 23, 2015

QHi Erica,

I have “no” credit except bills and debts. I am one of the poor people (yes, I admit it) here in the US of A who can't get good credit cards. What should I do to get ahead?? The deck is stacked against me and people like me. I can't even rent because of no credit. Everyone turns me down. –“Pat”

ADear Pat,
I feel your frustration. However, you've got to analyze your personal situation with as much objectivity as you can muster. Of course, some people are born with economic advantages, yet that doesn't mean you can't claw your way up and out from wherever you are now. And a credit card isn't a magic ticket to prosperity, though it often can be a great tool. Use it the right way and you can borrow for free, all while building a credit history that will help you look mighty attractive to a landlord, lenders, insurance carriers and even employers.Ask Erica

Do you really have no credit — and by that I mean no credit history? I think you might. Credit card accounts are not the only items that appear on credit reports maintained by the three major credit bureaus, Experian, Equifax and TransUnion. All of these show up:

  • Student loans
  • Car loans
  • Appliance, furniture and electronics store financing
  • Unpaid legal fines, such as parking tickets and even library fines
  • Child support arrearage
  • Bills that have been sold to collection agencies
  • Monetary judgments
  • Repossessions
  • Bankruptcies

If you have any of the above, you do have a credit report with something on it. Check your reports with the three major credit bureaus for free once a year at AnnualCreditReport.com. I'll bet they're not empty. In that case, you also have credit scores, since FICO and other scoring systems input all that financial information into their mathematical models and produce a number for businesses to access. These scores allow lenders to make sound decisions about taking you on as a customer. When the data on the reports are positive (such as loans that you've paid on time and fully satisfied), your rating will increase. You can check your scores at MyFICO.com for about $20 each. FICO is the scoring model most used in the United States.

The problem is, you have “bills and debts,” which indicates that what's on your credit report probably isn't so hot. If you have been applying for numerous credit cards lately, all those inquiries are showing up, too, which isn't doing your credit rating any favors. Thankfully, there is much you can do to change all that for the better.


Your primary task is to save up enough money to pay off what you owe. Do this and your credit rating will improve shortly after the balance reads zero. It will also augment your chances in securing a better place to live, as you won't be deep in debt. Perhaps you can take on a second weekend job or sell unneeded items.

After that, look into getting a credit card so you can add beautiful things to your credit reports. I assure you that it is possible, but don't shoot for any product that is out of your current score range. There is nothing wrong with starting with a secured card. Here's how a secured card works: You put several hundred dollars down as collateral, and you borrow off of that. Unlike a prepaid card, your good spending habits are reported to the credit bureaus. Just double-check that the issuer reports to the bureaus, put a small expense on the card each month, and pay off your bill in full and on time, every time. As soon as you charge and repay responsibly, you will create a pattern of borrowing and repaying that others will see and rate favorably.

Time is on your side: Recent good activity counts for more than older, negative activity. Eventually, evidence of whatever troubles you had in the past that are showing up on your reports will drop off and will cease to be a factor. Your score will improve within months.

Consider each month that goes by your opportunity to gain opportunities. Work hard, sock away cash for the future (including a security deposit that you can use for the home you want to rent), and prove to creditors how fantastic you are as a cardholder. All of this is within your control!

Got a question for Erica? Send her an email.