MSN Money
By Liz Pulliam

(Continued from page 1)

You still have to exercise some caution, though. Look for a card with a low or nonexistent annual fee and low interest rates. For now, just get one: Opening a slew of credit accounts in a short period of time can make you look like a risky customer.

Apply for a secured credit card

If you can't get a regular credit card, apply for the secured version. These require you to deposit money with a lender; your credit limit is usually equal to the deposit.

You'll want to screen your card issuer carefully. To be frank, there are a lot of bad guys in this particular niche of the credit world. Some charge outrageous application or annual fees and punitively high interest rates.

Your credit union, if you have one, is a good place to start looking for a secured card. You can also check Bankrate.com's list of secured credit card issuers.

Ideally, the card you pick would:

• Have no application fee and a low annual fee
• Convert to a regular, unsecured credit card after 12 to 18 months of on-time payments
• Be reported to all three credit bureaus.

If the issuer doesn't report to the credit bureaus, the card won't help build your credit history.

Get a finance company card

Gas companies and department stores that issue charge cards typically use finance companies, rather than major banks, to handle the transactions. These cards don't do as much for your credit score as a bank card (Visa, MasterCard, Discover, etc.), but they're usually easier to get.

Again, don't go overboard. One or two of these cards is enough. If you get many more, you may find that later in your life these accounts could prevent you from getting the highest possible credit score. That's not a reason to avoid them completely, because right now they'll do you some good. Just don't apply for half a dozen.

Get an installment loan

To get the best credit score, you need a mix of different credit types including revolving accounts (credit cards, lines of credit) and installment accounts (auto loans, personal loans, mortgages).

Once you've had and used plastic responsibly for a year or so, consider applying for a small installment loan from your credit union or bank. Keeping the duration short -- no more than a year or two -- will help you build credit while limiting the amount of interest you pay.

Use revolving accounts lightly but regularly

For a credit score to be generated, you have to have had credit for at least six months, with at least one of your accounts updated in the past six months.

Using your cards regularly should ensure that your report is updated regularly. It also will keep the lender interested in you as a customer. If you get a credit card and never use it, the issuer could cancel the account.

Just remember the credit tips mentioned earlier:

• Don't charge more than 30% of the card's limit.
• Don't charge more than you can pay off in a month. As mentioned earlier, you don't have to pay interest on a credit card to get a good credit score, and it's a smart financial habit to pay off your credit cards in full each month.
• Make sure you pay the bill, and all your other bills, on time.