Help! I Was Rejected for a Secured Credit Card
First, take a deep breath. This is not the end of the world; its not even your last chance at establishing credit, though your choices are narrowing. Be sure you understand why your application was rejected. (It could be something as simple as not demonstrating income -- a card issuer generally refrains from issuing a card to someone who does not have the means of paying the bills.) Thanks to stipulations in the Fair Credit Reporting Act, lenders must provide an explanation as to why you didnt get the card. This paperwork can help you figure out whats holding you back and what your next move should be before you apply for a new credit card.
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What Are Your Other Options?
Secured cards, like unsecured ones, come with different terms and interest rates, and the most desirable ones -- those with the lowest fees and interest rates -- may be slightly more difficult to obtain. So, one option is to look for a second- (or third-) tier card you can qualify for, possibly one that does not require a credit check. You may want to use this lower-tier card to demonstrate your creditworthiness, then ask to upgrade to a card with better terms and conditions down the line.
Another option is a credit-builder loan. These loans are typically offered by community banks or credit unions, and youll often need to secure the loan with an account at that financial institution equal to the amount of the loan. Interest is relatively low on these loans, and on-time payments are reported to the credit bureaus. At the end of the loan term, your cash is returned to you. Similarly, you may be able to get a share-secured loan by borrowing against a deposit in the financial institution. (These loans arent credit cards, but if your goal was to improve your credit, they can help -- and better credit will help you to qualify for a credit card.)
If the problem is you cant get a bank or credit union account because youve mishandled one in the past, you may need to apply for a joint account with someone who has better credit than you do. In this case, you could also see if having a co-signer could get you approved for a secured credit card or loan. (You could alternately see if a friend or family member will add you as an authorized user to their existing credit card account, though there are instance where issuers dont report authorized users to the credit bureaus, since theyre not liable for making payments on the account.)
Remember, a co-signer is doing you a huge favor; its a risk for him or her, and it offers essentially no benefit. You may want to offer to automate loan payments or to have statements sent to the co-signer so he or she can see that you are paying as agreed. Hopefully, after youve had an opportunity to improve your credit standing, those accounts can be reopened in your name only.
A Better Card in Your Future?
No matter how you try to address the situation, its important to be sure that the creditor reports to the major credit bureaus so you do get credit for good payment behavior and can readily qualify for financing (with better terms) down the road.
Its smart to monitor your scores (you can get your credit scores for free on Credit.com) and to check your free annual credit reports at AnnualCreditReport.com. You may be able to dispute any inaccurate or time-barred information that could be hurting your credit standing. At the same time, its crucial to make your payments on time and to keep your credit utilization (if you have a credit card) low -- less than 30% of your credit limit, though the lower, the better. Attending to those things should put you on a path toward better credit and easier approval for an unsecured credit card.
More on Credit Cards:
- Credit.com's Expert Credit Card Shopping Tips
- How to Get a Credit Card With Bad Credit
- How Secured Cards Can Help Build Credit
Are you qualified for a car loan?
You have made the decision. You are ready to get a new car. You can already smell that new car smell. The only problem is you dont have enough money to pay for the car in cash. You need a car loan.
So, what do you need to be qualified for an auto loan?
There are lots of factors that go into it:
- The type of vehicle you are looking to purchase.
- Whether you have a trade-in.
- The length of your loan term.
We talked to Michael Guilbault of Detroit Trading Co. about what you need to know before shopping for a car loan.
The debt-to-income ratio, or DTI, is the key to determining the terms of your auto loan for you and the lender. This ratio is calculated by adding all of your existing monthly debt and dividing it by your monthly income.
Your debt takes into account many things -- credit card balances, mortgages, student loans and other debts. A good rule of thumb is to keep your DTI below 30%, especially since you are adding another monthly payment to your debt load with a car loan.
You can use our calculator to help figure this out.
It is important to look at your credit history before deciding on a vehicle. Having past negatives can impact your credit score, resulting in a higher interest rate on the loan.
It can be a deal breaker to have a negative auto loan, but there are some lenders who will still offer financing at a higher rate or if you have a trade-in. It definitely helps to shop around, Guilbault says.
If youre thinking of shopping for a car, first check your credit score for free at myBankrate.
Do you have a thin credit file?
If this is your first car or you havent had a car loan in a while, you may not have much on your credit report.
This is not a deal breaker, but you may want to look into having a co-signer to keep your interest rates low. If you havent started building credit, consider establishing credit for at least 6 months before applying for an auto loan.
Guilbault suggests looking for first-time, auto-buyer programs. Many lenders offer these programs, and they can be a great way to get into that new car.
Guilbault says its important to browse for a new car with an open mind. Dealers and lenders are willing to try different options and deals, but if you are set on a specific car or a certain loan type, that can make the process more difficult.
Shop with an open mind and your research in hand, and youll put yourself in the drivers seat of your new car loan.