It can be very difficult to get your first form of credit. This is because you will not have a record of your borrowing history for creditors to examine. Very few lenders will give an unsecured loan to somebody with no credit history.
How does one get a credit history if they cannot get credit? There are a couple of ways that I know of. Both involve the fact that people may trust you despite a lack of public credit history if they have more local reasons to believe you are trustworthy. This could be in the form of a good relationship with them in the past, or through some sort of collateral.
The way I did it, was to go to the Hudson's Bay Company and apply for their merchant card. Even though I did not have any credit history, I did have a job that could be confirmed by HBC. I was given a credit limit 0f $500 that could only be spent at their stores, the interest rate was a very high 28.8%. Merchants will often take greater risks in lending to encourage sales, but they mitigate these risks with high interest rates.
Once I used that card and kept it in good standing for about 2 years, they raised my limit to $1000, at which time I called them and asked for an upgrade to a Mastercard. I got it. Even though I had no public credit history, I did have a local credit history with HBC which convinced them to lend to me.
Merchants usually do not report your merchant card activity to the public registrars, but they do keep their own records that they can use in their lending decisions. Once they give you a major credit card then they begin to report your credit history publicly.
The other way to establish credit when you have none is to do a secured loan. That is where you put something valuable up as collateral for the loan. It can be a car, and house, savings bonds, or even cash. Even with bad credit one can get a loan that is secured. If one remains in good standing with a secured loan eventually you will qualify for an unsecured loan.
Once you have a proper credit card then a credit history starts to form for you. If you keep it in good standing then you will form a good credit rating.
