If it is the first time you have applied for a credit card and your request has been denied, you may not have an established credit history. When you are subject to credit, you must have a track record to back you up, otherwise you will have very limited access for much needed loans like buying a house, car or finance a business.
And it may be a very cautious person to avoid falling into debt and prefer to use cash for your expenses, but it can backfire and that nothing helps you to establish a credit history you may need in the future.
Reasons to Establish Credit
In addition to access to loans, there are other reasons to establish credit such as;
- Access to a better insurance rate
- Get a good job
- Rent an apartment
It is important to explore various options available to begin to establish your credit; some of the options are as follows;
Open a Bank Account
Whether you open a savings account, this will help you establish a financial history with the bank that would make you eligible for a credit card.
Apply for a Secured Credit Card
The secured card is a form of credit that is backed by collateral, and this collateral consists of a deposit equal to the credit line. For example, if the credit line is $500, the collateral will be $500 deposited in the card of issuing institution. And if for some reason the card payments fall into arrears, the issuer will use the collateral to repay the debt.
Apply Store Credit
Get a card by a department store and it is easier than those issued by banks, plus it is a good way to save on the first purchases since they generally offer a discount of 10% if the card is approved. But you should be careful because interest rates or APR is considerably higher than bank credit cards.
Find a Guarantor for a Loan
If you know a person with good credit and mutual trust, this can be the guarantor of the debt. In this case, the debt appears to be in your name, and in case of default the responsibility will fall on the guarantor. But remember that the purpose of applying for the loan is not only to buy what you need but also about establishing your credit to go; therefore, payments should always be up to date as agreed.
Keeping Your Credit
Once you have your credit established, the next step is to protect it to maintain or achieve a good credit score, for which you need to make revisions at least once a year of your credit report.
On the other hand, you must manage your debts responsibly, so that they do not grow excessively; we recommend you to pay your bills as stated in the credit agreement.
Credit is very important in the US economy, especially consumer credit factor. But just as it is important to establish, it is necessary to handle with responsibility to avoid situations that could jeopardize your financial security.