Whatever your situation, it's a good idea to start off on the right foot with your credit. First, you'll need to know the basics.
If you don't have enough data to generate a credit score, you'll have what's known as a "thin file." You won't be able to pull your credit score, since you essentially don't have one.
Once you have enough data to generate a credit score, there's some good news: You won't start from zero. Contrary to popular belief, consumers with little-to-no credit history – as opposed to a poor credit history – start somewhere in the middle with a fair credit score. (You get the benefit of the doubt.) Here are four moves you can make this year to ensure you take full advantage of that benefit.
1. Know what's in your report.
Just because you haven't paid much attention to your credit doesn't mean your credit report is a blank slate. Credit reports are long and include more information than just your credit data. For example, it will show personal data such as your address, date of birth and employer.
Before you start working toward a stellar credit score, make sure all the information in your credit report is correct. Credit bureaus can and do make mistakes. You can get a free copy of each of your three credit reports – one from each credit bureau – at annualcreditreport.com.
2. Start small.
Credit cards are great for building credit if you use them responsibly. Start with a card that's catered to your needs.
3. Use your new card wisely, then upgrade.
To start establishing credit, you'll want to consistently pay your debts on time. The best way to do this with your first credit card is to make a few purchases each month, and pay off your statement balance by the due date. Keep this up for about six months.
Next, apply for a second credit card. If you started with a secured credit card, try asking your creditor if it can be converted to a traditional credit card. Keep up the same responsible habits you formed with your first card.
4. Know and monitor your score.
As you start building your credit, you should see the impact on your creditworthiness. But how do you measure that? Take a look at your credit score – a three-digit number that boils down your credit report and history. In a nutshell, it tells lenders whether it's a good idea to extend credit to you.
There are several sites that offer free credit scores – just make sure the one you choose doesn't ask for your credit card information or make you sign up for a trial that charges you later if you don't cancel it. Try a site such as creditkarma.com or creditsesame.com, which offer free credit scores directly from the credit bureaus.
Finally, remember that building good credit the first time is a lot easier than re-establishing credit after a financial pitfall. Learning good credit habits now will ensure your financial future for years to come.
Bethy Hardeman is the consumer advocate for creditkarma.com, a free credit monitoring website that helps more than 22 million people access their credit score for free.