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How to build credit if you have no credit or a bad credit history

Your credit score impacts everything from jobs to apartment rentals, car loans and more.

GREENSBORO, N.C. — Credit scores can impact everything from the interest rate you pay on a mortgage or credit to your insurance premium. So imagine what it's like for the millions of people who have no credit history whatsoever, or a very low credit score.

Consumer Reports has some important advice on the right way to rebuild your credit.

Here’s the kicker: if you want to build up your credit, you need to get credit. But how can you get credit if you have bad credit?

An important first step: Open a bank account, take out several small loans and make on-time monthly payments, which over time should improve your score.

Next, consider applying for what’s known as a secured credit card, which means that you’ve backed the card with cash. 

You can also ask a family member with good credit to add you to their credit card. Just make sure you have a good relationship with the person because if you miss or are late with a payment, it can ding both your scores.

And if you have any outstanding debt in collection, pay it off as soon as possible, and make sure to pay all of your bills on time to avoid collections in the first place.

“Once you pay off any debt in collections, many credit-scoring systems won’t heavily weigh them when your score is calculated," says Lisa Gill of Consumer Reports. 

And be sure to check your credit report carefully. Dispute any errors you might find by sending a certified letter with evidence to the big three credit bureaus. They have about 30 days to respond.

Consumer Reports says to be very wary of any quick fix credit services that offer help for a fee. You don’t have to pay to fix your credit. It just takes a solid financial plan and some time.