One of the biggest problems many consumers who don’t have a borrowing history but want to start establishing one may run into is that lenders simply aren’t willing to extend them credit.

Even as the recession’s effects recede and lenders become more willing to extend credit to borrowers who had defaulted in the past, consumers who don’t have an established credit history of their own – particularly those who are young adults just beginning their lives as financially independent people – might still be having trouble getting a card in their name. Fortunately, there are a few workarounds to this problem.

[Free Resource: Check your credit for free before applying for a credit card]

The first is for the credit hungry to simply find an adult co-signer with a good borrowing history who can help obtain a card for them. Of course, this comes with certain responsibilities that new borrowers may not consider. For example, co-signers are just as responsible for the debts on the new card as the person who’s actually using it, meaning that a late payment or a default will have a  negative impact on their credit score. The upside, though, is that by having a co-signer with a strong credit history, new borrowers can also get cards with more affordable terms.

Another possible option for new borrowers who want to build their own credit history is to get a secured card.

These accounts are available to anyone, without a credit check, and are established by making a down payment, usually of a few hundred dollars, to the lender as a means of establishing the account’s credit limit. Of course, not all secured credit cards are the same, and some don’t report to the credit bureaus, meaning borrowers will have to make sure the account they’re getting will help them build a credit history in that way.

[Credit Cards: Research and compare secured credit cards at Credit.com]

However, secured cards usually have higher credit limits than unsecured cards, and many also carry annual fees, so new borrowers may want to use this type of account as a kind of introduction to card use, and not an account they rely on once they’ve established a credit history.

As with any other consumer, new borrowers should be prepared to keep their balances as low as possible and make all their payments in full and on-time to maintain a strong credit standing.

Image: Diego Torres Silvestre via Flickr

When it comes to credit cards, you can be your own consumer advocate… or your own worst enemy. And these days, this lesson couldn’t be more important.

According to TransUnion, one of the major credit bureaus, the number of new credit accounts grew by 14 percent in 2011, including subprime credit.

While I’m glad that subprime consumers are able to get back into mainstream credit, be careful. You’re likely to get a high interest rate, so don’t carry a balance. And I hate to sound skeptical, but even though the CARD Act is in place, there are still plenty of ways for banks to take advantage of consumers.

Since so many people seem to be rediscovering credit cards, it’s a good time to look at ways you can protect not only your credit, but your hard-earned cash as well.

[Free Resource: Check your credit for free before applying for a credit card]

1. Speak up if you’re unhappy

For this to work, you need to stay under your credit card limit and pay your bills on time. Then you’ll have leverage when something unpleasant—like an interest rate increase—happens. If you get whacked with a high rate and you’re an exemplary cardholder, call the issuer and state your case.
Likewise, if your annual fee goes up, call and ask them to waive it. Tell them you’ve been an awesome customer. You’ve got offers from other card issuers who are happy to have your business.

See how this is done? You can always advocate for yourself, but this strategy works best if you’re a top-notch customer. Speak up and you might be able to keep more of your cash where it belongs—in your pocket.

2. Keep tabs on your credit history

Every year, you can get your free credit report from each of the major credit bureaus—Equifax, TransUnion and Experian—on AnnualCreditReport.com.

You want to review the report and look for errors or any signs of fraud.  An error can really bring down your credit score and that will cost you when you apply for a credit card or a mortgage. This is a simple, but very effective way to protect yourself when it comes to your credit life. Put it on your calendar, and every four months get a report from one of the bureaus. To keep tabs on your credit throughout the year, use Credit.com’s Credit Report Card for an easy to understand overview of your credit standing.

[Related Article: Can You Establish a Great Credit Score... Fast?]

3. Get your credit score

A FICO score is what most lenders use to gauge your creditworthiness, so that’s the score you want to look at. You can get your FICO score for $19.95, or you can compare other credit score monitoring products, but just make sure they offer a FICO score.

Credit scores go up and down constantly, so keep in mind that you’re getting a measure of what your score is at that particular time. Even so, I think it’s vital to check your score from time to time. This gives you an idea of your credit range so you know what types of credit cards you should apply for. Your score will get dinged if you repeatedly apply for cards that you can’t possibly qualify for. You can get an estimate of your credit score range for free with Credit.com’s Credit Report Card.

4. Be aware of the consumer protections your card provides

Many credit cards, especially those in the elite group, like Chase Sapphire Preferred, offer purchase protection and extended warranties. Purchase protection can have your back if your merchandise gets stolen or accidentally damaged.

Extended warranties on credit cards extend the manufacturer’s warranty and it varies by card. It’s not unusual for people to buy extended warranties when they already have it via their credit cards. Some credit cards even still offer price protection but this isn’t as common as it used to be.

How do you know what protections you have? It will be listed in the disclosure statements. If you didn’t keep them when they arrived in the mail with your card, get online and read the fine print. If you can’t find the information about these benefits, call your card issuer and ask.

5. Know the details of rewards programs

I review tons of rewards programs and I can tell you that some of them are the pits. Not that the programs don’t have great rewards, but they explain it in a convoluted fashion. Sometimes you even have to look at several websites to get the whole picture.

You can Google the card name with something like “rewards program” and see what pops up. Yes, it’s tedious, but it helps to know everything about the program so you can take advantage of it. The flip side, of course, is that there are also land mines in the details.

You want to make sure you read everything because you could find nuggets like, “If your card is inactive for 12 months, you’ll lose your rewards.”

[Credit Cards: Research and compare credit cards at Credit.com]

10 Ways to Protect Your Credit—and Your Money (cont.) »

Image: 401K, via Flickr.com

While having a credit score won’t solve all your problems, it can certainly make your life a bit easier when it comes to financing a new car, purchasing a home, securing cell phone service or getting a line increase on your credit card.  Obviously, it really helps if your score also shows that you’re a low credit risk!

While the majority of U.S. consumers above the age of 18 have a credit score, there are millions of people who don’t have a credit report or credit score.  For example, young people who are just entering the credit market, recent immigrants to the U.S., consumers who opt to use cash or other non-credit payment options and people who are not recently active with their credit.  While no one knows the exact number of consumers who don’t have a credit score, estimates range from 30 to 50 million people.  That’s a lot of people who—either by choice or circumstance—fall outside of our “mainstream” credit system.

[Article: How Credit Inquiries Affect Your Credit Score]

While the exact criteria required to have a credit score varies by the different credit scoring systems used, all require some degree of credit history on a credit report in order to generate a score that is predictive of a consumer’s future credit risk.  For a FICO score to be generated, a credit report must contain at least one credit obligation that has been open for 6 months or longer and has been updated/reported on in the last 6 months (and no deceased status on your report).

For example, under this criteria, a person with just one credit account (a Sears credit card, for example) that was opened 8 months ago and updated (or reported on) two months ago would meet the minimum criteria required to be scored.  Conversely, a person with 15 credit accounts that have been paid off with the most recent activity being reported 10 months ago would not meet the minimum scoring criteria—and would, therefore, not have a score.

For consumers who have existing credit, this is why it is important to use it periodically.  For example, make a small purchase using an existing credit card and pay if off in full when the bill is due.  That way, you can maintain your credit score should you need credit in the near future.

[Featured tool: Get your free Credit Report Card from Credit.com]

The process is a bit more challenging for consumers who have no credit history.  It’s a “catch-22,” in which you need to have credit to be able to get it.  So here are a few tips on how to establish credit:

• Credit unions, as they are membership-based, may offer products and services and/or special programs designed to help members who are new to credit.
• Many banks offer secured credit cards.  This is where the available credit line (or portion of that credit line) is secured against a deposit that you’ve provided.  These secured cards are usually reported to the credit bureaus just like a regular credit card (be sure to confirm this with the bank before signing up).  As it is reported, it will help you build your credit history.
• Ask a family member or friend to co-sign or be a co-applicant with you on a loan or line of credit.  Once approved by the lender, it will be reported on both applicants’ credit files. There is a big caveat to this approach, however. You want to make sure their credit is good (it needs to be if the lender is to approve the request for credit), and remember both parties will be liable for the payment of the credit if it is granted. This means if you manage the account poorly, your co-signer’s credit will suffer as well as your own.
• Ask a family member or friend to place you as an authorized user on their credit card account.  Once approved by the lender, the history and activity of that credit card will be reported on both of you to the credit bureaus.  Again, enter into these relationships carefully as you want to make sure they are paying as agreed/carry low balances on that credit card.  Also note, any negative information on that card (historical or in the future) will be provided to the credit bureaus and could negatively impact your score.

Your credit score is an important part of your “credit DNA”—don’t take it for granted.

Image: Andy, via Flickr.com