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Building Credit Without a Credit Card

Ask Savvy: Why Was My Credit Card Application Denied? Part I


Dear Savvy,

I'm new at this credit thing and I'm not sure when or why I should check my credit report. I have never had a credit card (still don't) but I got denied for one a few weeks ago and I don't know why. Does checking my credit report worsen my credit score? Does getting denied for a card? How often should I check my credit report and/or score? What's the difference?! Obviously I am not financially savvy! No one ever explained to me how to manage credit so now I'm trying to get some and I'm completely lost!

To see my answer just read more.

You're on the right track in thinking that your credit report has something to do with why your application was denied, but it's not because you have bad credit. It's that you don't have any credit attached to your name. In order be given access to credit you need a credit history showing how you handled your finances, and that information is used by credit card companies to determine your eligibility.

If you don't already have checking and savings accounts, that's step one. Just because your credit card application was denied it doesn't mean you'll never be able to carry a card of your own. Apply for a secured credit card, which works differently than a regular card— instead of the company giving you a limit, they require that you deposit money and then your credit limit is equal to the deposit.

Check out Bankrate's list of secured credit issuers and pick a card with low fees, will convert to a regular credit card after about a year of punctual payments, and will be reported to the credit bureaus because (otherwise you wouldn't be building a credit history). If you use a credit union, ask them about any secured card before you look at other sources.

Once you do get a regular credit card, make sure that you use it responsibly by charging only what you can afford, never using more than 30 percent of your limit, and paying off your balance each month, and paying your bills on time.

Check back in a bit for my explanation to the other part of your question regarding credit report versus credit score.

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