How can I get a credit card?
November 20, 2005 11:00 AM   Subscribe

Credit woes & despair...

I'm 24 and don't have a credit card - but it's not for lack of trying. I have been rejected 5 times. The last one was the most crushing, as it was for a Washington Mutual card (my own bank). The thing is - I have always been very, very responsible about payments of any kind and always have plenty of money in the bank. The 'delinquent activity' the rejections keep mentioning seem to be the couple of months where there was confusion between me and my parents over who was paying the student loans and no one did (I did used to have a credit card that linked to my parents' account). But that got settled long ago. And that seems pretty minor, no?

So... what the hell do I do? I need a card. At this point I'll take anything, don't care about rates and such. Advice, anyone? Who can I talk to?
posted by ORthey to Work & Money (38 answers total)
 
Will your bank give you a secured card?
posted by ThePinkSuperhero at 11:01 AM on November 20, 2005 [1 favorite]


You can probably get either a department store credit card, or a secured credit card--the kind where you put down a deposit equal to your credit limit-- to build your credit rating.
posted by Jeanne at 11:02 AM on November 20, 2005


I tried once getting a Macy's card... didn't work. You think WaMu would give me a secured card?
posted by ORthey at 11:03 AM on November 20, 2005


As long as you had the money to secure it with, I don't see why not.
posted by ThePinkSuperhero at 11:04 AM on November 20, 2005 [1 favorite]


Check out the "Art of Credit" forums, they're a much better place to throw out this question.
posted by evariste at 11:05 AM on November 20, 2005


ORthey -- have you actually checked your credit report? Thanks to Congress, it's now free -- you may discover that there are incorrect entries or items you've forgotten that may be holding you back.
posted by VulcanMike at 11:05 AM on November 20, 2005


Don't just "take anything"; that'll cause you so many problems down the road.
posted by cmonkey at 11:08 AM on November 20, 2005


You should get a copy of your credit report. If you're denied credit you're supposed to be able to request a free credit report within something like 30-60 days of the denial. This may be different based on the state that you live in, I'm not sure if it's a federal or state law that requires credit organizations to offer free reports if you've been denied. You'll need to request one from each of the three major credit organizations, I can't remember what they're all called.

You need to see what your credit score is, and if there's any negative information on your credit report that you can get sorted out. Negative information can follow you for 7-10 years.

Even though the issues with your student loan seem minor, if that's the only thing that's on your credit report, and there's nothing positive there, you could have a very low score indeed. You need to get something positive on there as well. Just paying your utility bills and other bills won't show up on your credit report - you need to establish a line of credit with someone in order to do this. There are a few methods someone with bad credit can use to build credit up. Your best bet is to get a secured credit card - meaning you give all of the money for the credit line to the bank up front, and then as you make payments in time, they will eventually extend credit to you once you've proven yourself.

Another thing you could potentially do is get someone to co-sign on a credit account for you. My mother co-signed for a car lease for me when I was 20, and it helped me out in a major way. This is much more difficult to do, and it's a huge favor for someone to do for you - if you don't make your payments the co-signer will be on the hook for what's owed.
posted by pazazygeek at 11:10 AM on November 20, 2005


One other thing I wanted to mention - I've heard that every time you apply for credit and get denied, it can ding you a few points on your score. I'm actually not sure if it's just the request for your credit information that makes a ding, or if it's the actual denial. So if you're getting rejected consistently, you should stop applying until you have all of the information - know your credit score and what's on your report. Some much smarter me-fite than I could probably explain this better.
posted by pazazygeek at 11:13 AM on November 20, 2005


A secured credit card is virtually risk-free for a bank. Say you get one with a credit limit of $1000 - to do so, you deposit $1,000 in an account that you can't take the money out of (until the credit card is cancelled). Thus the bank doesn't have to worry about you not paying - they can always tap into your restricted account.

The good thing is that, from the viewpoint of a credit reporting agency, a secured credit card looks the same as a regular credit card. Once you have a couple of years of credit, you'll find it easier to get regular (non-secured) credit cards.

Another way to build credit is a car loan. If you put a large percentage down (say, 50%), and have insurance, it's a virtually risk-free loan for a bank. And if you have a fully-paid off car with some value to it (say, it's worth more than a few thousand dollars), you can get a loan against that.

My experience is that credit unions are much more likely to take into account all aspects of your situation (education, job, how long you've lived where you do, how you present yourself, etc.). If you can find one where you're eligible to join (based on where you work or live typically), you should consider that. (And don't hesitate to go in and actually talk to a loan officer - remember that their job is to make loans, wherever possible, not to reject people unnecessarily.)
posted by WestCoaster at 11:14 AM on November 20, 2005


Thanks, everyone... I'm going to apply immediately for a secured card. I appreciate the help.
posted by ORthey at 11:18 AM on November 20, 2005


As others have mentioned get a copy of your credit report. It may be the student loan matter you mentioned, but there may also be mistakes on the credit report that need correcting.

The FTC webste, www.ftc.gov, has a lot of great information on credit bureaus and how to get a free copy of your credit report.

Check your FICO score. www.myfico.com is one way. ( This is the site the Art of Credit forums recommended.) It costs $44.95, but you get all three credit reports and all three FICO scores. (They tend to vary widely.)
posted by birgitte at 11:20 AM on November 20, 2005


Why do you need a credit card, besides to build credit?
posted by footnote at 11:30 AM on November 20, 2005


Before applying for a secured card, I suggest that you try Providian. You can apply online at www.providian.com. Their rates are high, but the entire company is designed (good or bad) to get a card into the hands of people with bad/not so good credit.
posted by richardhay at 11:30 AM on November 20, 2005


By the way, why do you need a credit card? Why not just use a debit card?

I mean, you put $1000 into the bank to get a CC, and they still charge you fees and intrest on your debt? That just seems like a bad deal.

Also, remember that applying for credit also impacts your credit rating. "Inqueries" show up on your credit report for 6 months, so don't apply everywhere or it'll look 'bad'.
posted by delmoi at 11:35 AM on November 20, 2005


You shouldn't have to spend $45 to get your FICO scores.

Go to www.annualcreditreport.com -- it's the site that, basically, the government told the Big Three agencies to set up. You're entitled to one free, full credit report annually from each of the three agencies via that website, with no gimmicks and no strings attached. Adding your FICO score to each of them shouldn't total more than $30, I think it's actually less.
posted by CrayDrygu at 11:35 AM on November 20, 2005


And to the people asking, "Why do you need a credit card, besides to build credit?"

That's possibly the best reason to get a credit card. Responsible use of a credit card can boost your rating significantly. Perhaps to the point where you can get, say, a new car loan. Paying that off responsibly, with continued responsible use of a credit card (or maybe two now) will boost you even higher, and maybe qualify you for a good rate on a mortgage.

Or you could just use a debit card, and good luck getting a good rate on your new home with no credit history.
posted by CrayDrygu at 11:38 AM on November 20, 2005


I'm actually not sure if it's just the request for your credit information that makes a ding, or if it's the actual denial.

Denial of credit is not reported. However, every time someone accesses your credit report, that access is logged and becomes part of the report. (Note that this is a measure of protection in your favor--you can't just pull anybody's report without leaving a trail.) If there are a *lot* of accesses recently, the lender might infer that you have some upcoming debts that are new that aren't being reported yet, raising the risk that you might be more overextended than the report would show otherwise. If there are a *ton* of them, there's the possibility you might be running some kind of scam, going off the deep end on a monster credit spree, etc.

Back in the day (when we walked in the snow ten miles to do credit approvals, and we didn't have these newfangled FICO scores, dagnabbit) we knew very well who the local collection agencies were, and if we saw their name on a credit inquiry, we knew something out of the ordinary was going on, and although we would never use that alone for denying credit, that application would still get a little extra double-checking.
posted by gimonca at 11:41 AM on November 20, 2005


I'm pretty sure I got my FICO score for about $15 when I got my free credit report from annualcreditreport.com earlier this year.

If you don't need credit right now (and really, if you have parents that will help you out in an emergency, you don't need a credit card), a year of regular payments on your student loans should be enough to repair your credit troubles. Late payments are one of the quickest things to disappear from your negative points column. Taking out another loan, secured by your parents if your score makes you too much of a risk for the bank, will help even more.

I went from a credit score in the 500s (very bad) to a score in the mid 700s (very good) by buying a car and making all those payments and all my student loan payments on time. It took about two years. My score was low because of missed student loan payments, and I didn't have a good excuse for them either -- I was hiking in the Appalachians and driving around America and couldn't be bothered to pay my bills for a few months.

You should never get a credit card that you don't plan to pay off in full every month. The advantages of a credit card are that it will provide some protection for you if you're buying stuff over the web, and it will give you access to money in case of an emergency (like car failure) that you need to pay for now when you don't get paid til Friday.

That said, I've used my credit card for bigger purchases that I could't afford to pay for all at once, and I don't think it's really hurt me. Sure, I paid a couple of bucks of interest for the three months or so it took me to pay of my laptop. It was worth it to me. It's gonna take me about a month to pay off my ipod, too. Damned consumer impulses! The important thing is to pay off one impulsive expense before you charge up another. That's what gets people in trouble, with gazzilions of dollars of seemingly-insurmountable debt.
posted by croutonsupafreak at 11:47 AM on November 20, 2005


I had the worst credit in the universe. It was repaired when I got a debit/credit card at my bank that immediately withdrew my "charges" from my account. At stores I *always* used the "charge" option. Within 3 years I had a a Visa, MasterCard, American Express, Kohl's, Target, and Sears. Before that I couldn't even rent a apartment.
posted by xyzzy at 11:50 AM on November 20, 2005


That said, the advice in pazazy's post deserves to be flagged "best" here.

You say that the student loan matter was "settled". That could mean more than one thing. Even if it were paid in full, the lender or collection agency could still report it as having been paid slow. That would eventually drop off with age.

It is at the discretion of the lender or the agency as to what they report to the credit bureau--my hunch is that asking them not to report, because you're such a great person or whatever, is unlikely to work--but it doesn't cost anything but your time to ask. My experience in the past talking to people who worked for agencies that collect on student loans is that the companies are typically run by absolute rat bastards, so set expectations accordingly.

If you were taken to court and you lost, that is a matter of public record. That'll be on there for at least 7 years, regardless.
posted by gimonca at 11:55 AM on November 20, 2005


I got a credit card when I was 18 and had no credit through my credit union. A few years later, I got another credit card and put myself seriously into debt.

Seriously, consider if you need one before you get it, or leave it at home like I do now... ... ... frozen in a large block inside the freezer.
posted by SpecialK at 11:56 AM on November 20, 2005


Back in the day....it used to be that you could beg and cajole your hometown department store, talk to a real human in their downtown office with decision making power, and get a little credit card account with like a $200 limit. After a year or two of good behavior, they'd raise your limit, but more importantly, you'd get that pay line on your credit report.

Sadly, with all the consolidation that's gone on, your application is more likely to get thrown in the sausage grinder with ten thousand others a week, and be decided on a calculated score.

Still, here's where the golden opportunity can be: if you could just know who the small, local businesses are who would report to the credit bureaus. One possibility is to ask some trusted family or acquaintances what credit accounts appear on their report. You don't have to look at the actual report or know how good or bad it is--you just need to know what companies are reporting. A local or regional hardware chain might be more likely to cut you a deal that a big national department store conglomerate. But, you don't want to waste your time on them if they don't report to the credit bureau.
posted by gimonca at 12:09 PM on November 20, 2005


and really, if you have parents that will help you out in an emergency, you don't need a credit card

Somehow, this comment reminds me of this thread. I wouldn't want to have to wait a day to be sent funds in an emergency (though we don't know who was sending the poster money, but it could well have been the parents).
posted by advil at 12:25 PM on November 20, 2005


Non-payment of old credit cards isn't that bad for securing new debt. If anything, missing credit card payments puts a giant target on your back for other credit agencies to solicit you. MBNA, for example, looks for people with huge amounts of debt on other credit cards as an incentive for you to move over to their card. The worst thing for a credit card company is someone who pays their debts in a timely manner.

But what will kill any chance of securing new debt is having unpaid student loans. It's like you're infected with credit-plague, and no injection of bancruptcy will cure you. The message is simple: rampant consumerism=good; education and self-betterment=bad.
posted by Civil_Disobedient at 12:52 PM on November 20, 2005


I had a kid out of state who might need money.
I just opened a checking account in both names, and sent the kid the card linked to it. When the kid needed money, I transferred it via the web site to the kid's account, and the kid could take it out, 24/7. It does require advance planning, but the money can be available at any hour of the day or night.

I told the kid to tape the card in an underwear drawer, "If you put it there, I know where it is. If it's anywhere else, I can't help you." The kid thought the underwear drawer was a good idea, so I could always tell them where it was.
posted by unrepentanthippie at 12:55 PM on November 20, 2005


definitely get a copy of your credit report. check and double check any and all information on there. if you find that there's a mark against you, file a dispute with the credit reporting company. they have about 30 days to confirm the bad info and send you proof and documentation on it. if they don't get back to you, follow up on it... they're required to remove it from your report.

that's the easiest way to improve your credit that i've heard of. most of the time they'll never bother to get back to you even if the complaints are valid.

it takes a little bit of work and a lot of patience, but getting your credit back in shape isn't impossible. i will be a LOT more beneficial to you in the long run to take care of negative credit marks that way than to just try to cover them up with secured cards and more credit. not having good credit doesn't just keep you from getting a credit card... whatever is on your report will keep you from getting housing, a car, and a lot of other things.
posted by booknerd at 1:05 PM on November 20, 2005


This thread reminded me that this month is the tenth anniversary of the discharge of my bancruptcy. Figured it was a good time to check and I just used the annualcreditreports.com site to get all three, plus the credit scores. $5 at Experian, $5.95 at Transunion and $6.95 at Equifax. $18 for all the peace of mind I'll need this holiady season.

And for what it's worth, I'll offer these words of advice:

Making payments works. Using credit responsibly works.

11 years ago I was left in the lurch with nearly $25k in debt, not including a car that was later repo'd. I stopped making payments because I just couldn't. I took "the easy" way out nearly a year later and filed for bancruptcy. I was a kid: 24, living on my own in Chicago working as a nanny. I couldn't see a way out.

In 1998 I needed a car. I paid interest through the nose at 25.6%! I didn't want to, but my then girlfriend put it to me this way: You need a car, you fucked up and now you've got to pay. Think of it as an investment in your future. And make double payments at every turn."

In 2000 I moved across country to start a new life with my then partner and we bought a home together. We paid a slightly higher interest rate (probably a half percentage point), but not bad considering that I had a bancruptcy on my file. I didn't think we'd get approved, but we didn't have a problem at all. I believe my score was right around 625.

In January of 2004 I was pleasantly surprised when I went shopping for a new car and Honda awarded me their best financing offer. When I got home I looked at my credit score to find it had crept up nearly 100 points to 720.

Just now when I pulled the reports? 813 out of 850.

It's enough to make me wanna go buy that $3000 flat panel TV I passed up yesterday at Best Buy. I kid, I kid.

Oh, and Providian is the first card I got after my bancruptcy (If memory serves, the offer was in my mailbox within a month of my debt being discharged). I did not like them as a company, but they are a necessary evil. Watch how you spend with it and watch the interest rate. It climbs consistently. I now have a nice low rate with Citicards.

Good luck to you!
posted by FlamingBore at 1:28 PM on November 20, 2005


"Before applying for a secured card, I suggest that you try Providian."

I would not do this. Providian has an exceptionally bad reputation. They prey on those with no other option, but there has got to be a better way than going with them.

My first credit cards were an Apple Computer credit account, a Dayton's card (in Mpls) and a Nordstrom account (in Seattle). I would perhaps try for a Target card or something -- but if, as you said, you are unable to get that, try the secured card route through WaMu -- just stay far far away from Providian.
posted by litlnemo at 1:33 PM on November 20, 2005


I second the no on Providian. They do hand out cards pretty easily, but they will try to screw you over.

Check out Capital One. When rebuilding my credit after a bankruptcy, they were the first folks to give me a secured credit card.
posted by Serena at 1:59 PM on November 20, 2005


I have pretty bad credit and I get these credit card 'offers' all the time. Not only do they give you an awful interest rate, they also. nail you with various fees. An annual fee and a 'signup' fee. Those annual fees mean that you'd need to carry a $10k debt on the card in order to have a decent interest rate.

I really can't see why you'd want to pay $200 - $300 for the 'privilege' of having a credit card. If you keep paying your student loans on time, you should be fine.
posted by delmoi at 2:08 PM on November 20, 2005


The best "Secured Card" deal is Wells Fargo and other "name banks".....(Wells Fargo is the best according to most on Art Of Credit). Don't go for those that make you pay a deposit, then an annual fee, then a per transaction fee, then a this and a that until you are nickeled and dimed to death.

-
posted by Independent Scholarship at 2:17 PM on November 20, 2005


Thanks, everyone... I'm going to apply immediately for a secured card. I appreciate the help.

No offense, but I hope you're still reading this thread long enough to see that getting a secured card is a temporary solution to a potentially long term problem.

1. Get all three credit reports immediately (free) from annualcreditreport.com. Don't waste money on the credit score; that's only useful if you're applying to get a house, car, or care about your penis size.

2. Review the material carefully (preferably with someone who has seen them before) and understand why, exactly, you're being declined credit. It could be something simple; it could be that someone stole your identity and your credit completely sucks. This step is critical. Don't skip it. When I was 22 I saw a collection on my account from a phone company I used my freshman year of college. A collection when my credit history was only four years old killed my credit score and kept me from getting decent rates.

3. Repeat this process every 6 months to a year.
posted by SeizeTheDay at 2:43 PM on November 20, 2005


Or you could just use a debit card, and good luck getting a good rate on your new home with no credit history.
posted by CrayDrygu


There are actually people who reject the notion that you need to live with any credit. They get houses. There is ways to do it. Many schools of thought (and books) lead to a life without depending on credit.

Not for everyone, but the assumption that credit is your only choice is false.
posted by justgary at 4:44 PM on November 20, 2005


I had no credit when I graduated from college. I was rejected for a regular credit card and a few depatment store cards -- not because there was anything bad on my credit report, but because there was nothing at all. I put $500 into a Wells Fargo secured card and used it for groceries and gas for the next few years, paying off the whole balance every month. After a little under two years they sent me back my $500 and converted my card to a regular card. No annual fees, no finance charges since I didn't carry a balance -- the only thing I lost was the potential interest on the $500, and I wouldn't have saved that money anyway.

Anyway, I now have excellent credit, I have a credit card with a high limit for emergencies, and I feel pretty good about the whole thing...certainly I could have kept on without any credit, but I like the idea that at least there's nothing working against me should I decide to buy a house or a car someday. Some employers also check credit reports.

Good luck to you.
posted by climalene at 5:18 PM on November 20, 2005


Some employers also check credit reports.

So do landlords, insurance companies, and some utility companies.
posted by SeizeTheDay at 5:37 PM on November 20, 2005


"No offense, but I hope you're still reading this thread long enough to see that getting a secured card is a temporary solution to a potentially long term problem."

No offense taken - of course. But the truth is, I am indeed looking for a temporary solution. I just need to start building good credit. I am very responsible and will always pay on time.

I've ordered the credit reports and will scrutinize them very carefully.

Thanks for all your help, everyone!
posted by ORthey at 1:34 AM on November 21, 2005


You've gotten a lot of good advice on this thread - I'm going to add some experiential advice as someone who completely screwed his credit years ago.

This is the PERFECT time of year to draft letters to the credit bureaus for disputes on your reports. Do not waste any time - anything you think isn't yours, write them a letter, explain the situation. Send it certified mail.

This time of year, the Big Three are slammed with correspondence (slaves to their own rules) and by law, they have 30 days to establish proof or they have to resolve things in your favor. By law. This means that they then have to contact the creditor, which eats up time. Your chances of having inaccurate information (or...um...slightly inaccurate information, etc) are much much higher if you diligently start writing the letters NOW.

Around 60 days after you get the response letters from them, (they WILL respond) pull your reports again. Anything they said they'd do and didn't will require another letter. Keep after it. It takes months, sometimes a full year, but it's worth it. This process added 200 points to my FICO score over a period of 18 months.
posted by TeamBilly at 9:04 AM on November 21, 2005


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