Apply for Secured Credit Cards

by Mack Bartlett

A couple of years ago my little brother crashed his car and needed to buy a new one. He wasn’t looking to get anything too expensive or brand new, but he didn’t have the cash for a car. He was going to have to get a loan. Only one problem, right? He didn’t have the credit history to get approved for the loan, no matter how small it was. He had to have my parents co-sign the loan with him. Both he and my brother in law should have looked to apply for secured credit cards as a way of building their credit history.

My brother in law went through the same thing. The weird thing was he actually makes decent money and had a nice chunk of cash in the bank. He went to apply for a loan, and they wouldn’t approve him for anything. The only option they gave him was to put some of his cash in an account and they’d let him borrow enough money for the new car. I’m thinking – why would I give you the cash so I can borrow some money? Why not just pay cash for the car?

Both of these guys were in the same situation, they didn’t have enough credit history to get approved for the loans they needed. How do you get that history? You need to open lines of credit.

It’s like the old saying about getting a job – you can’t get a job without experience, but you can’t get experience without a job. The solution to the problem in the professional world is to get yourself an internship. You work for free for a while to get yourself some experience. The employer doesn’t have to risk much because you’re not getting paid, but it’s worth it for you because you’re getting the experience people are going to look for when you interview in the future.

In the world of credit cards, the internships you get are called secured credit cards. Since you don’t have the experience (credit history) that makes them feel safe giving you a credit card, you have to minimize their risk.

The solution here is that you apply for a secured credit card. Basically you’re putting down some money – giving it to the credit card provider as collateral just in case you decide not to make your payments. They know they can use your deposit to cover unpaid balances (but you won’t leave those balances unpaid, will you?), and while you’re making payments they’re sending good reports about you to the credit bureaus.

Of course, while you’re doing your credit card internship, make sure you apply for low interest secured credit cards. There’s no reason to pay a bunch of interest while you’re establishing yourself as an experienced credit user. Eventually you’ll have enough ‘on the job experience’ so credit card companies will give you the credit cards you want. Just make sure you use them wisely…

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