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Whether you are just starting out or starting over, figuring out how to build credit can be confusing. Don't let it overwhelm you. There are some simple steps you can take right now to establish credit. Before you know it, lenders will be chasing you with offers.

No. 1: Check your credit. If you haven't established credit, this advice may sound pointless. Unfortunately, though, children are sometimes the prime target of identity theft and some young adults who apply for credit for the first time discover their information has already been used by someone else to get credit. Request your credit report at to make sure you don't already have a credit history.

No. 2: Get your first credit reference. Your first credit reference will establish your credit history but it can "take credit to get credit." That's why a secured credit card is often a popular way to get started. With a secured card, you'll place a security deposit with the financial institution and, in turn, get a card with a credit limit that is usually equal to the deposit. Choose a card that reports payments to the major credit reporting agencies (Equifax, Experian and TransUnion) and you'll be able to establish credit with all three of them. Other ways to build credit include getting a car loan, retail credit card or student loan.

No. 3: Use it but don't abuse it. Use your new secured card to purchase things you'd buy anyway -- gas or groceries, for example -- but don't charge it up to the limit. Ideally, you want to use about 10% to 20% of your available credit in order to maintain a positive "debt-to-available-credit ratio." That means that if you have a card with a $300 credit limit, you'll want to charge only about $30 to $50 a month on the card. It may not sound like much, but even that small activity will help you establish credit.

No. 4: Pay your bills on time each month. Your payment history counts for about a third of your credit history, so make sure you keep it squeaky clean. One late payment can mean a big drop in your credit scores. Set up online alerts or mark your calendar so you don't let a due date slip by.

No. 5: Round out your references. The best credit scores go to those with a well-rounded credit history that includes several different types of loans -- all paid on time, of course. So once you've had that first credit card or loan for at least six months, consider getting another loan of a different type. If your only credit reference is a credit card, for example, you may want to get a personal loan or auto loan. If you have only a student loan, then it would be a good idea to get a credit card.

No. 6: Monitor your credit and scores. Once you understand how to build credit, you have to maintain it. If you've put in the effort to build good credit scores, the last thing you want is to let a mistake ruin all that hard work. So get your free credit reports each year at, and check your credit scores monthly through's free Credit Report Card. Look for unusual activity or changes that can indicate a problem. Hopefully, all you'll see is progress toward establishing great credit!

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