Need An Expert Please !!! Should I Apply 4 A Credit Card Even Though ?!!!
So here's the deal - Earlier this year (around March) I had applied for a credit card from my bank and was rejected (I had no credit). But I ended up having to get a small loan to get a new engine for my car that was around $1300. I payed it all off with no late payments and whatnot. So I'm hoping it brought my credit score up a bit.
So I really would like to apply for a credit card again but I dont know if it's too soon. I know it effects my credit score so yeah - I dont really want to mess that up.Also, before my loan my credit score was 616. And my checkbook had been stolen a few years ago which caused me to overdraft (a few times :S - they ended up going to jail)
So I'm wondering if that has anything to do with me being rejected or will have any effect on my reapplying.And PLEASE I dont want to hear the crap about why I shouldnt get a credit card. I'm not a total idiot. :) If you need anymore info just let me know and I'll add details.Thanks guys in advance!
The Answer : I Can Help
I am going to tell you what makes up your score to give you a better idea of what you're dealing with:
1. Payment history- 35%
2. Total debt owed vs. available credit-30%
3. Length of time establishing credit-15%
4. Types of credit established-10%
5. Inquiries and new accounts-10%I'm going to explain how these 5 factors played a part in why you didn't get the card, how the loan will affect your score, and what you can do to get that credit card. Ok, you didn't get approved because of
#3, which isn't a bad thing because you got a small loan which helped
#4. Remember, there's 2 types of credit that you can establish, revolving and installment. by opening up that loan. It takes both kinds of credit to establish your score. Now, one thing you should keep in mind that whenever you apply for credit, regardless of if you're approved or not, a "hard inquiry" is created which drops your score anywhere between 5-10 points (see #5) So it's important not to apply for a lot of credit.
So each time you apply for credit, you need to make the most of it. Now it's a good thing that you paid off the loan, that will definitely look good on your score. My next thing would be this. Depending on where you bank, you might want to see if they offer secured credit cards. They may, then again, they may not. Some credit unions and large banks like Bank of America, Wells Fargo, USBank, all offer these.
Remember when I told you that it's important that if you make every application count. And a secured card does just that. It give you the best chance of getting approved mainly because you have to place a deposit upfront, to make it a low risk. How it works for example is if you placed a $300 deposit, you'd get a credit line of $300. You still would have to pay back what you've spent, like a regular card.
The deposit is used only as collateral to insure that whatever is spent will be paid if it goes delinquent. A couple of advantages is that by adding to the deposit can raise the limit(see #2), which gives you more control, and usually the deposit is linked to a savings account or a CD which gains interest while you're building credit. A good way to use the card would be to treat it as if it had a credit limit of $50 at any given time. Spend $20 a month, pay it off on time, increase the limit, and do it again the next month. This way, you're building credit, but not going into debt while you're doing it.
Usually after a year or so of paying on time while building the credit limit, the card either converts to a regular card or a better card is offered, and most importantly the deposit is no longer needed and is given back to you. In a sense you will have custom built a credit card that you're satisfied withI posted links below to some companies that should help you Thanks for reading and good luck!
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