Don't know much about credit history

March 21, 2009 10:12 AM

I lose at building a credit history. Help?

I'm a recent college grad with no credit history -- no loans, cards, anything. After doing some research, I applied online for a low-fee, high-APR credit card (one specifically marked for people with no or limited credit history) and was rejected. Oh well, I thought, probably just the economy.

I did some more research and decided to try building credit with a secured card, but was rejected for that as well. I found that strange -- what's the risk for them? -- but I've since read that multiple credit inquiries in a short period of time is a red flag. I've have moved every year for the past five years, and I've only been at my current job for about seven months. So, fair enough: I look high-risk on paper.

Is there anything else I can/should do right now? I have little interest in actually using a credit card -- I certainly don't need one -- but I do want to build credit. On the other hand, I don't want to keep swinging and missing if that's going to hurt my credit score, as I've read it does. Should I just chill out for a while and then try again? For how long?

posted by anonymous to Work & Money (14 answers total)

Get a department store card. And see if you can join a credit union .... open a bank account there and ask if you can get a line of credit tied to your account for overdraft protection. (Like a $500 line of credit.) Then ask if you can use that separately as a credit card.

And I don't know the answer as to the multiple inquiries. Yes, it hurts your score but it's a small component.
posted by Happydaz at 10:23 AM on March 21, 2009 [1 favorite]

Visit a small local bank and see what their policy is. Get some cash in an account with a debit card that is also has a credit card option. Begin to use it as a credit card. After a few months of transactions it should seed your score to get to the next step.
posted by sammyo at 10:30 AM on March 21, 2009

Don't apply online -- go in to your bank's nearest branch and apply for one of their cards in person. Seek out a personal banker. He or she probably has a desk off to the side, and if you aren't sure who to talk to, just go up to the teller and say, "Who can I speak with about opening up a credit card account? It shouldn't be a problem to get a credit card from your bank. That's why you have checking and savings accounts. You do have a savings account, right?

They might try to convince you to buy a CD or something. Refrain.

If you only do your banking online, I'd suggest opening a checking account at a brick-and-mortar bank and developing a relationship with someone who works there. Many big adult activities, like buying a car or a house, become much easier when you have a good relationship with someone at your local bank.
posted by incessant at 10:31 AM on March 21, 2009

Are the utilities at your current place in your name? If not, see if your roommate(s) would mind switching one or all of these accounts to you - and then pay it on time every month. A history of on-time payments of any sort of account helps your credit score, it doesn't have to be a credit card.
posted by rkent at 10:32 AM on March 21, 2009

And by 'buy a CD,' I mean put money into a Certificate of Deposit, not the new Kelly Clarkson album. Instead of a CD, stick with high-yield online savings accounts unless the CD's rate is higher enough to offset the lack of liquidity.
posted by incessant at 10:34 AM on March 21, 2009

Oh well, I thought, probably just the economy.

That might well be part of it. It's a weird world out there right now.

Department store card is a good suggestion. I'd try something low-key like Penneys or Kohls, or a local chain like Herbergers is in the upper Midwest.

I've since read that multiple credit inquiries in a short period of time is a red flag

That's true -- a report with little or nothing on it but lots of inquiries can be interpreted as possible fraud. As long as it's just 3 or 4, shouldn't be a problem, but I wouldn't go nuts sending out 20 applications or more in a short period. You need to look like a young person just starting out, not a young person going on an ill-advised credit bender.

Another common way for people to get started out is with their first car loan, but I haven't been car shopping during the current environment, so I'll leave that for other people to comment on.
posted by gimonca at 10:37 AM on March 21, 2009

Are the utilities at your current place in your name?

In my experience, those don't usually show up on a credit report.
posted by gimonca at 10:38 AM on March 21, 2009

The real answer is you should ask this on CreditBoards. They'll be able to tell you which credit reports your two inquiries will show up on based on who you applied to, who else to apply to so that the inquiry shows up on a different credit report provider, and who to apply to that you're likely to be granted.
posted by raf at 11:15 AM on March 21, 2009

Are the utilities at your current place in your name?

In my experience, those don't usually show up on a credit report.

Hm... I could have sworn they did in the past, but in reviewing my most recent reports, they don't seem to be appearing. Well, sorry to mislead, then.
posted by rkent at 11:34 AM on March 21, 2009

gah! I have the same sort of problem. I swore off of credit many years ago, make almost triple digit income, single, have relatively tons of money in the bank, paid cash for last car... decided to get a credit card for travel and such... keep getting turned down. "you have no credit history."
posted by zengargoyle at 3:10 PM on March 21, 2009

Have you checked your credit reports to make sure there is nothing incorrect on them? You are entitled to a free report from each of the major credit firms from https://www.annualcreditreport.com
posted by nalyd at 3:58 PM on March 21, 2009

Ditto incessant's advice. Go to the local branch of the bank you have your checking/savings account at, ask them about getting one of their credit cards. Since they already know you, chances are much higher at getting approved.
posted by reptile at 4:24 PM on March 21, 2009

I am you. I was under 18 for most of college when everyone else was getting pummelled with credit-card offers, and I didn't think I needed one because I had a debit card, and "credit cards are bad."

I applied for a pre-approved offer I got in the mail, and for a store card, and for a card with the bank where I had a savings and checking account, and was denied for all. Have you contacted the people who denied you to ask why you were denied? You have a right to do that. When I called J.Crew, it turned out that the correct SSN that I put on my application didn't match the SSN that the credit bureau had on file -- that was a huge hassle, but is fixed. Also when someone denies you credit, you can get a free credit report from whatever bureau they checked with, although you are also entitled to free reports each year. Don't bother paying for a FICO score -- you probably don't even have one.

I haven't tried for a secured card yet, but that's very strange that you were denied; they aren't even really supposed to check your credit to give you a secured card.

I'm an authorized user on my parents' credit card. This wasn't showing up on my credit history until my dad called MC and gave them my SSN and asked them to report to the credit bureaus. You might be able to do the same with your utilities, but many things don't report until you do something wrong. Mine don't report.

So... I have no answer! But definitely find out the reasons you were denied for the credit cards and the secure card, and get copies of your credit reports. Good luck!
posted by thebazilist at 7:48 PM on March 21, 2009

When this happened to me, I had to get my father to cosign on a card with me. I even tried getting a card through my bank--no dice without a cosigner even though I had utilities in my name and had an account at that bank for over five years. It doesn't have to be a parent, just someone with some sort of credit history.
posted by Violet Hour at 11:12 PM on March 21, 2009