Check Your Credit Report

• You may already have a credit history and not know it. If you have ever had a credit card, mortgage or any bank loan, your lender likely reports the account to the major credit bureaus. If you have bad credit and want to rebuild your score, check your report for weak areas in your finances. For example, if you see a high utilization ratio -- portion of your credit limit available -- funnel money into credit-card payments.
  
  

Budgeting

• You cannot build good credit unless you have control of your finances. If you have an ever-increasing debt load and frequently miss payments, you need to adjust your budget to accommodate your life style. Go to a credit counselor if you cannot figure out a way to pay for your debts and essentials with your income. You may have to give up some luxuries, such as eating out and vacations.
  
  

Open New Accounts

• Whether you have bad or no credit, a new credit account can help you build a good score, because the FICO scoring model gives you points the more accounts you have with a perfect history. Gas and retail cards have the most lax lending standards, but also have low limits and high interest rates and fees. A secured credit card almost guarantees you approval, because you secure the limit with a bank deposit. However, you also have to use these accounts. You only need to make a small charge, such as paying a phone bill, and pay it off so the lender can report something to the credit bureaus.
  
  

Beyond Credit Scores

• Lenders may reject your loan applications even with a great credit score, because they factor in other variables into their lending decisions. For example, most lenders do not approve mortgages for people who have been at their job for less than two years or have large gaps in their employment history. Also, try to stay in the same state and keep the same telephone number, because the credit bureaus track demographic data, even though this data does not affect your credit rating.
  
  

Considerations

• Recovering from bad credit can take months and years. If you have no credit history, the bureaus need about six months of data before they report your accounts and calculate a score, according to Khalfani-Cox. However, if you keep paying bills on time and eliminate as much debt as possible, you eventually will have at least an average score of 620.