How to Establish Credit When You Can’t Get Credit

Getting Credit for the First Time

One reader asked, “I just got turned down for a credit card. How am I supposed to establish credit, if I can’t get a credit card?” Great question!

Yes, that is a real problem. It’s very hard to get credit today with our ecomony the way it is. First I would start with your own personal bank, the one where you keep your checking and savings accounts. If they have their own credit card division you stand a great chance of getting a credit card through them because you have a relationship there. 

If your bank doesn’t have a credit card division (yes, that is possible). Then you need to get a secured credit card. A secured credit card is one that is secured or guaranteed by your bank account. For example, if you have a savings account with $1,000 in it, then you can get a credit card with a $1,000 limit. The bank is comfortable doing this because they have your savings account as collateral to guarantee your credit card. As time goes by, and they see you are responsible with your credit card (making your payments on time and not going over your limit), they will increase your credit limit, and you may be able to apply for other cards or loans. 

You must ask your bank this one very important question before you apply for a secured credit card: Does the Lender report the secured credit card information to EquiFax, Experian and Trans Union, the three major credit reporting agencies? If they don’t, you’ll want to get a secured card at a different bank. You won’t “establish credit” unless your credit habits are reported to the right agencies.