There have been some really good replies so far, but I’ll add my experience too.
I was in a similar situation about 3 years ago. I arrived from England in 1999, didn’t need credit and didn’t want it anyway. A couple of years later, I realized that I needed a credit history and did some research. Here’s what I did (that got me up to to a FICO of about 700 in a year). I have included some general advice too.
1) Got a crappy VISA card with $250 limit and $75 annual fee! After one year they waived the fee..
2) Got a SECURED credit card through my bank. No annual fee. They took $300 of my money and gave me a $300 credit limit. Make sure that they report the account to credit agencies – they usually do.
3) Bought a car and financed a small portion. While others were getting 2.9%, I got 7.9%. Pay off loan regularly, as agreed.
4) Paid off all credit line accounts every month – carrying a balance on credit line doesn’t help your score (I’ve been told that by a few financial advisors).
5) Try and not use too much of your credit – like under 30% if possible. Tricky when you only have $500 of credit, but it’ll get easier once they start to trust you.
6) Get 2 or 3 credit cards, keep them (age of accounts is a critical score measure), and every six months or so you’ll find your limit increasing. If it doesn’t after some time, then call the credit company and ask them if they’ll increase it.
7) Do not go crazy with store cards. The temptation to get that 10% off is high, but don’t do it if you’re planning on needing a good score in the next couple of years. It will cost you more in the long run with a higher interest rate.
8) Do not open new accounts all the time, and don’t go for mortgage pre-approvals unless you’re serious about it. Just check your FICO score every 6 months… These “inquiries” can count against your score. Someone looking for more credit is more likely to get into more debt! That’s the theory anyway… Your FICO score “inquiries” do NOT count against you.
In general, you should have lots of old, established credit (but not “too” much, whatever that is), not be using the bulk of it, be paying it back on time ALWAYS, and not be looking to borrow more.
FYI – I’ve got about 5 years of credit history now and my FICO is 785. After 2 or 3 years I was in the 700s.
