Capitalism is competition. Each merchant wants you to buy from their store, not from the stores of their competitors. It's the same in the credit industry. Each credit card company wants you to be their own customer. To entice you, each card issuer offers certain advantages to you in the form of extra benefits such as perks, cashback, and even lower interest rates. But, in order for them to offer those benefits, they must make a profit. To make a profit, they must have customers with credit scores that compliment the credit card's benefits. Hence, customers who are considered a high risk due to bad credit, wouldn't be a good investment for card issuers who offer high perks and low interest rates.

If you establish credit properly, instead of you having to seek credit and submitting applications which get rejected or downgraded to poorer benefits, good credit will come to you.

What about job opportunities? Thanks; or no thanks, to credit report bureaus, your credit score can impact your employment opportunities as well as promotions. Certain job positions; like those that deal with trade secrets or large sums of money, require trustworthy employees who are financially sound. In such instances, many employers rely upon credit report scores to gauge a person's financial security. People who are deep in debt can be considered a threat to the company.

And it doesn't stop there, either. Life insurance companies may use credit scores to rate a person's financial value before writing a large sum policy. Landlords may use credit reports to see if a prospective tenant has defaulted on previous leases. Rental and utility companies also use credit reports to limit their losses.

Now more than ever, properly building credit is important, and it's equally vital to maintain a good score. Even one minor infraction, like making a late payment or exceeding your credit limit, can hurt you for years.

Tips on How to Build Credit:

Check your credit report to see if there's anything in it that needs attention - Check your report at all three major bureaus (Equifax, Experian and TransUnion). Each year, you're entitled to one free credit report. Even if you have no credit history, you may still have a credit report and score. There could be credit report errors, either through a credit bureau mistake or because of identity theft. If that's happened to you, clean your credit report before trying to apply for new accounts.

Why is it important to have an accurate credit report? Credit reports are used to create your credit score, a three digit number many creditors and lenders use to gauge your creditworthiness based upon your current and past history. As mentioned previously, landlords, employers, insurers and utility companies may also evaluate your credit score.

Open savings and checking accounts - In addition to helping build credit, these accounts are deemed by creditors and lenders as signs of stability. It's also possible that; it not immediately, over time the bank will offer you either a credit card or a debit card which can further help build credit.

Learn what makes your credit score - The two most important factors in your score are whether you pay your bills on time, and how much of your available credit you actually use.

Pay all your bills on time, every time - To make it easier for you, set up automatic payments or a bill reminder system so you're never late. One missed or late payment can seriously harm your credit score, and it can take up to seven years for the negative, late payment to be removed from your report. Also don't reach; nor go near, your credit limits. Try to keep your credit use to less than 30% of your available credit limits. Some financial advisors believe it's best to payoff credit card balances in full every month.

Have a good credit person help you get credit - Get someone to cosign a loan for you. Having a cosigner with good credit can help you get approved for loans you might not otherwise get. The loan will show up on your credit report, as well as your timely repayments which will help improve credit scores. On the flip side, if you don't make timely payments, not only will your score be damaged, so will the score of your cosigner.

Get one; and only one, credit card (and only if you can control spending urges) - Look for a credit card with a modest credit limit, a low or no annual fee as well as low interest. When you're building credit, rewards are not that important. In fact, most rewards credit cards have high interest rates, and may end up costing you more than the rewards earnings if you don't pay off balances in full each month. If you can't get approved for a standard unsecured credit card (or if you cannot control spending urges), get a secured, pre-paid card. Secured cards do not have an open line of credit, and you can only spend up to the amount you deposit (pre-pay) onto the card.

Whether you get an unsecured credit card or a secured card, you want a card that offers:

• No application fee and a low or no annual fee
• No deposit
• An upgrade to an unsecured credit card after 12 to 18 months of on time payments (if you get a secured card)
• Reports your timely payments to all three credit bureaus, otherwise the card won't help build credit

Can't get a secured or unsecured credit card?

Get a store charge card - Retail stores that issue charge cards typically use finance companies rather than major banks to handle the transactions. So, even those these cards don't help build credit as much as bank cards(Visa, MasterCard,Discover, Chase, etc.), they can still help and are much easier to get.

Get an installment loan - For the best credit score you need a mix of credit types, including revolving accounts (credit cards, lines of credit) and installment accounts(auto loan, personal loan, mortgage).

Summary: For a credit report score to be generated, you have to have had credit for at least six months and with at least one of your accounts updated in the past six months. Charging regularly with cards should ensure your report is updated regularly, plus it will keep the issuer interested in you as a customer. Otherwise, issuers may close inactive accounts.