My boyfriend is 25 years old and has absolutely NO credit whatsoever. I am not saying he has bad credit, he has no credit. He has tried applying for smaller lines of credit lately to start off somewhere. He has been denied twice.
We were told to try the bank. He had his dad co-sign on a loan with him. They were denied that too. His dad/parents have a healthy line of credit so we are a bit bewildered at this point.We plan on getting married in the next couple of years and will want to buy a house, cars, who knows what else. He needs to start working on his credit ASAP. What can he do to establish credit somewhere (anywhere at this point) and start building his credit history?
Actually I have been told by several different financial people to NOT pay the credit card off each month. You will never build any credit this way. You have to show the company you have the card with that they can actually make money off you. If they can't, what is the point?
The Answer : A secured credit card is going to be the best option. The first place you may want to try is where your boyfriend banks. But even before doing that, he needs to have his own checking and savings account if he doesn't have one already. He may want to open one at some of the bigger banks like Citi, Bank of America, Wells Fargo, and USBank, or you may want to try a credit union.
The major banks I mentioned all offer secured credit cards. This is going to be your best bet and the easiest to apply for. Keep in mind that by each time he applies for credit whether he's approved or not, it drops his score. So if we're taking score that's 3 times you said he's applied, 3 times he's been deined and 3 seperate times his score has dropped as a result. So with that said, you should limit the applications down to something that will give him the best chance of getting approved for, which in this case would be a secured card.
How it works is that a deposit, which is used as collateral that's usually linked to a savings account or a time deposit (CD) account which gains interest while you're building credit. Also, it helps to periodically increase the credit limit by adding to the deposit. 30% of your score depends on the size of the cushion between the total debt that's owed and the available credit.
A good practice on using the card would be to treat it as if it only had a limit of $50, however you're going to only use $20 every month by making small purchases that can be easily paid off on time every month. This way the balance is manageable, activity is shown on the account, without getting charged boatloads of interest.
Like I mentioned earlier, increase the credit line periodically. Usually after a year or so, either the card converts into a regular card or a better card's offered, and most importantly the deposit is no longer needed and is given back with interest.
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