There are multiple reasons why people may want to establish new credit. They may be new entrants into the world of credit, or are perhaps trying to reestablish credit after a financial hiccup. Either way, there are some do’s and don’ts that consumers should follow that will make the road to credit much smoother.

Do obtain a copy of your credit report from AnnualCreditReport.com. This is particularly useful if you are trying to rebuild your credit, as you’ll want to review what existing debts you need to satisfy before moving forward.

Do open checking and savings accounts. Even though this activity is usually not reported to the credit bureaus, lenders may inquire about the presence of such accounts on credit applications, thus it can count in your favor.

Don’t apply for too much credit at once. This can appear as though you’re desperate for credit and perhaps make lenders less inclined to extend credit to you. Further, too many credit inquiries can have a negative impact on your credit score.

Do apply for a variety of credit types. Credit scoring models value having different types of credit. Therefore, having some revolving accounts (typically credit cards) and some installment fixed payment loans (such as a car payment) can improve your score.

Do research the type of card that is right for you. Each issuer has different lending standards (yes, a credit card is a loan), so you’ll only want to apply for cards from those whose lending profile you fit. Familiarize yourself with the various standards by going to CreditCards.com or Bankrate.com.

Don’t fall for a credit repair scheme. Why pay for something that you can do for yourself for free? If rebuilding credit, know that time is your friend, as the farther you move away from the financial distress, the less negative impact it has. Follow with responsible behavior with your new credit, and you’ll soon have a solid credit file.

Don’t pay to piggyback. Piggybacking is a legitimate way to build a credit history, but only if you use it as it was intended. This tool allows someone with existing credit to add an authorized user to their account. The credit activity is then reported in the primary cardholder’s name as well as the authorized user’s name. Examples are adding a young adult on the parent’s card, or a spouse on the other spouse’s card. The wrongful use of piggybacking would be when strangers utilize this method, typically for money.

Do consider a co-signer. Obtaining a loan in the absence of any credit history can be difficult, sometimes requiring a co-signer to guarantee payment. The loan is usually structured where the primary borrower is expected to make the payment, with the pay history reported in both names. If the borrower defaults, the lender will approach the co-signer, and missed payments will be reflected on both credit files. There is somewhat of a risk to the co-signer, but if handled responsibly, co-signing can be an effective way to help another person obtain and build credit.

Do consider a secured credit card. This type of account is secured by a deposit made to the financial institution issuing the card. For example, if you wanted a card with a $500 limit, you would deposit that amount with the bank offering you the card. Know, however, that secured cards can have fees attached to them, and typically have a higher interest rate. The account activity is reported to the credit bureaus each month, and after responsibly making payments on a secured card, the issuer often offers the borrower an unsecured card.

Do take out a small loan. A personal loan from a bank or credit union can serve to establish credit. You may be asked to put up collateral, but it will be worth it in order to build your credit.

Equally as important as establishing credit is treating it responsibly. Paying your bills on time all the time ensures that you enjoy all the benefits of credit.

This post was provided by The National Foundation for Credit Counseling (NFCC). Money Management International is a member of the NFCC.

Sure you’ve heard of Experian, Equifax and TransUnion, but there’s a lesser-known consumer reporting agency worth knowing about.

Many banks and credit unions use the services of ChexSystems to help them determine whether or not to open new accounts. ChexSystems maintains a database on consumer’s bank accounts that have been mishandled. If you have written numerous bad checks or closed an overdrawn bank account in the recent past, your name and how you mishandled your previous bank account, has probably been supplied to ChexSystems. Negative information remains in ChexSystems database for 5 years (versus 7 years for the credit bureaus).

If you wish to get a copy of your ChexSystem file showing what information is entered, please go to ChexSystems Web site. (You can see a sample report here as well.) Under the FACT Act, you are entitled to a free copy of your report every 12 months.

If you find an error on your report, you can dispute the item(s). ChexSystems is required to research any entry that you believe is inaccurate and will report back to you with their findings in approximately 30 days. If the reinvestigation does not resolve the dispute, you may be able to add a statement, in 100 words or less, to your file giving your version of the dispute. ChexSystems will include a summary of your statement in future reports.

Identify theft victims will also want to keep ChexSystems in mind. Just as with the credit bureaus, you can place a security alert you’re your ChexSystem file. You can also “opt-out” of prescreened offers by calling 1-877-OPTOUT 5. (The number to opt-out with the credit bureaus at 1-888-5 OPTOUT.)

Like the three major credit bureaus, ChexSystems is regulated by the federal Fair Credit Reporting Act (FCRA). You can read the FCRA by visiting the Federal Trade Commission’s Web site.

An Advice Team writer recently asked: “Is a creditor required to report your payment history to the bureaus?”

This is a question I have avoided answering throughout the years because I’ve been unclear about the answer. I finally took the time to do some digging only to come up a firm ‘maybe.’ Here is what I learned:

But back to the original question. From what I understand, creditors have some flexibility, but don’t necessarily get to pick and choose when they report. According to one of my trusted credit bureaus contacts, once a creditor reports on an account, it is their responsibility to continue reporting. However, if they have never reported the account at all they do not have to start reporting payments. I believe this is outlined in the agreement between the creditor and the bureau and is not necessarily part of the Fair Credit Reporting Act (FCRA). As far as I can tell, the FCRA (§605) deals more with what should not be on your report than what should be on your report.

If you have any information to add about this somewhat confusing issue, please share it though the comments section.