Never had a credit card? Here’s how to get one
The Uber visa, launched last fall, can target millennials on the go with incredible rewards, such as 4% for dining out and 3% for airfare.
But the odd thing, as with many high-yield credit cards, is that approval for one of these Barclays cards Uber Cards is not a slam dunk for some millennial consumers.
Many millennials may have the college degree and the new job, but sometimes they’re held back by some of the more lucrative rewards cards because they were too careful about managing college credit. Yes really.
A young teacher recently shared her credit card rejection letter with me. The reasons have been listed:
- Too few accounts with sufficient satisfactory performance.
- Insufficient number of credit cards with your credit report.
- Insufficient credit history on your credit file.
- Low credit limits on installment transactions on your credit report.
The weird part? She had a credit score of 719, according to the rejection letter. Typically, 719 is a good score; an excellent score is usually between 750 and 850.
Did someone make a mistake? How do you reject someone with a 719 credit score? Did we mention she has a job? And she’s not drowning in credit card debt? She remembers once being late with a utility bill.
“In my opinion, no credit is better than bad credit,” said Clare Naughton, 24, the teacher who lives in Greenville and purposely never asked for a credit card while in college.
“I’ve heard horror stories about getting a credit card too young,” she said. “I just didn’t want to have one until I was financially stable.”
Many in his generation would rather turn to debit cards to control spending.
“We think a lot of people think using a debit card creates a credit history. It doesn’t,” said Barrett Burns, president and CEO of VantageScore Solutions, consumer credit scoring model, created by a joint venture of the three major credit bureaus, Equifax, Experian and TransUnion.
And no credit history or limited credit history can create barriers to getting a credit card.
Unfortunately, it’s not uncommon for a lender to cancel an otherwise good credit score because of a limited credit history, according to John Ulzheimer, a credit expert who previously worked for the ratings firm FICO.
“Limited credit reports make lenders less confident that the score is a solidly valid representation of the applicant’s risk,” Ulzheimer said.
A credit score predicts risk by analyzing your history of borrowing money and paying bills on time, as evidenced by credit reports compiled by the three national credit bureaus.
Credit scores take into account missed loan payments, high credit card balances and personal bankruptcy.
Here’s how to approach applying for a credit card and what to know before applying for a rewards-rich card:
1. Understand that some cards are not in cards for consumers who have a limited credit history.
“Premium credit cards like the Reserve Chase Sapphire and the American Express Platinum would likely be out of reach for people of all ages who have thin credit records,” said Matt Schulz, senior industry analyst for CreditCards.com.
He notes that many millennials have full credit records and some have obtained these cards.
“In fact, the Sapphire Reserve has been such a hit with more upscale millennials that it has almost single-handedly disproved the conventional wisdom that millennials don’t like credit cards,” he said. he declares.
Some millennials are deeply passionate about hunting rewards cards, so they’re likely to seek out an Uber visa as well.
And the rewards can be tempting: Uber Visa benefits even include up to $600 for cellphone damage or theft when you pay your cellphone bill with your card.
But then again, if your credit history isn’t that long — and you avoided getting a credit card in your mid-twenties — you might have a harder time getting cards than you expect.
2. Buy credit cards for people with no credit.
The chances of getting approved for a credit card increase for those with little or no credit experience if they apply for cards marketed to this group.
Some options include the Capital One Platinum Card which targets those with a limited disability or no credit history and the OpenSky Secure Visa which has a high chance of approval but a $35 annual fee, according to WalletHub.com.
A number of card issuers are targeting those with more recent credit reports or less than stellar credit scores, Ulzheimer said.
“Credit unions also tend to be more flexible in their offerings, as do smaller local and regional banks,” Ulzheimer said.
Secured cards are also an option for someone just getting started, such as the Discover it Secured card.
If approved, the cardholder secures the line of credit with a deposit. A $200 line of credit requires a $200 deposit. It is not a prepaid card or a debit card. If you pay your balance in full and close the account, you may get the security deposit back at some point.
“It’s a good, low-risk way to get started with credit. However, it’s just a stepping stone,” Schulz said.
“Once you’ve done a good job with the card for six months to a year, switch to an unsecured card with better terms and bigger rewards,” he said.
3. Check your credit report.
It is important to understand which loans are listed on your report. You want to correct errors before applying for credit. Make sure no one stole your information to open a car loan or credit card in your name.
4. Clean up your financial act.
There are steps you can take to boost your credit score before applying for a credit card, car loan, or mortgage.
You would like to have established a history of paying all your bills on time. According to the Consumer Federation of America, a late payment can lower your credit score by dozens of points.
Be sure to use only a small portion of available credit on a credit card. In general, the higher the percentage of a line of credit used, the lower the credit scores. You may want to aim to borrow only 25% of the available line of credit.
It can help your score if you pay off your credit card debt rather than just transferring it to another credit card or home equity loan.
You can answer 12 questions online quiz at www.CreditScoreQuiz.org to better understand how to improve a score. These tips can help you if you’re applying for a credit card, car loan, mortgage, shopping for insurance in many states, signing up for cell phone service, or renting an apartment.
Having a bad credit rating, of course, means you’re likely to pay higher rates on a credit card or car loan. On a typical $20,000 car loan from a bank, for example, a borrower with a low score would likely be charged at least $5,000 more in interest than a borrower with a high score.
After opening that first credit card, paying on time and not borrowing near the limit is key to establishing a good credit rating.
Contact Susan Tompor: email@example.com or 313-222-8876. Follow Susan on Twitter @Tompor.