It’s weird to me. I recently applied for a bunch of rentals and my lack of credit has been the main thing holding me back. I have resolved to get a secured credit card but like how tf do people usually build credit anyway? I got denied by several other credit cards.
I also tried to apply for a loan earlier last year for a tow behind camper and even with 10k down on a 16k camper they said no. It’s like they can’t comprehend what I mean when I said I don’t have a credit score…it’s not a bad credit score….it’s that I have literally zero history. I’ve paid for everything in full including my car and the travel trailer that I ended up buying and yet I’m punished for it.
Anyways, how do most people get their name in the system? Is it always with a secured credit card?
In: Economics
When I was about 16 my mom added me to her credit card and by the time I was 18 I had a credit score.
My husband had no credit score when we met and I had him get a secured loan. Then we got a regular credit card together. By the time we wanted to buy a house we had good scores.
You build credit by borrowing money and then paying it back.
Of course, this means finding someone willing to lend you money in the first place.
Some banks, for example, are willing to give (unsecured) credit cards to college freshmen, knowing that the odds of being paid back are sufficiently good to make this work despite the college freshmen are all young kids without any credit history.
Most people get a credit card
Use it each month for something you need anyway like groceries then pay it off in full each month
Credit card. Use it for literally everything, never use cash you don’t have, pay it off in full every month. Credit isn’t about how responsible you are with money, it’s about proving you can responsibly handle debt. It’s a terrible system and makes no sense, but it is what it is.
In some cases parents will add children as authorized users on a credit card, then destroy the card. If the parent is good with money, their child starts with an account that’s been open for as long as they’ve been alive and has never missed a payment. Instant advantage.
Student Debt is another way young people can build credit. Consistent payments result in a good credit score.
And lastly, as you’ve suggested, secured credit cards are another common way people start building credit.
> I’ve paid for everything in full including my car and the travel trailer that I ended up buying and yet I’m punished for it.
This is the weird part. Very few people pony up a lot of cash like this for items. The ones that do tend to make very large down payments and for many kinds of loans that can substitute for bad credit.
I hate saying what “most people” do. I’ll tell you what I did. Predatory credit card people set up shop at a Pizza Hut in my college town. You got a free pizza if you signed up. So I signed up.
Then I started using the credit card. I wasn’t great with it. I got into a little bit of debt, but I didn’t drown. Suddenly I had a credit history. Dad co-signed with me on the first apartment, that let us use his better credit. But we were also dealing with a small landlord instead of a corporate property manager, so that person was more trusting of the idea that if I turned out unreliable my dad would make the payments *and* teach me a lesson. I also had student loans I was paying back.
I think most people fall into that kind of category, they either:
* Have so much money their wealth is collateral for loans, and those loans establish a history.
* Get a parent/spouse/friend to co-sign so they can use that person’s credit history.
* Start with a credit card or some other form of easy-to-get credit.
They want to see that you’ve been in debt before but did not fail to meet your obligations. If you haven’t been in debt before they get real antsy. If all you’ve ever done is pay cash for things they want you to put up collateral in lieu of having a history.
Do you work a normal W-2 job?
Seems odd to me that you would get denied a basic credit card (no rewards, like Capital One Platinum) and have to resort to a secured card (not that it’s any different other than the deposit/limit)?
But yeah, just get a credit card and if you need a good score fast then make sure you don’t use more than 10% of your limit (so if it’s $250 then no more than $25, you can make payments every few days instead of once a month if you want).
Look at nerdwallet.com for low-credit cards. Get a few. Just use one, and request credit limit increases regularly. If your initial limit is low, pay it off when it gets to 25% to keep utilization low. The two biggest factors in your credit score are not missing payments, and having a low utilization rate. So if you have a lot of credit but you’re only using 10% of it vs 90%, you’ll have a better score.
Sometimes phone or other utility bills will be reported, so if you have them in your name and pay on time it can help
I started by using a secured credit card issued by Bank of America.
Basically, I was issued a credit card that had a $300 limit, but that $300 was backed by a physical $300 I had to keep in a special account there.
Eventually the limit went up, and the back-up $300 could be removed and it was a regular unsecured line of credit.
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