I just got declined for a credit card and I am confused by it

[fluiddruid]

@BigT

If you don’t understand how requiring to already have something in order to get that same thing is counter-intuitive, then I don’t know what to tell you. “Sorry, sir. But to buy ice cream, you have to give me some ice cream first.”

It honestly seems to be set up in the most confusing way possible. What you said is not what you are told, at all. You are simply told you must have a credit score to get credit, which definitely sounds idiotic.

I can get that it seems like a paradox - you need a credit history to get credit. But, actually, you don’t need good credit history to get credit all the time. It’s just that most lenders prefer some credit history, particularly for loans without security or collateral. That doesn’t mean you can’t get a credit card if you haven’t had debt before.

For example, I got a credit card in college with no credit score. Unsecured and all, it was aimed at college students and even had a sign-up bonus, because they wanted to catch people young. For older folks, store cards are a good one because they know you must shop in their store; because of the added benefit to the retailer, the expectations are lower. Think of it like the job adage “you need experience to get a job”. If it were that clear-cut, nobody’d have a job, but it’s often true. You just have to start at the entry level and work your way up. Don’t apply for a top-tier reward card right away; start with an easier card to acquire.

The world of understanding consumer credit is intimidating and credit scores honestly really aren’t meant for users to understand. However, it’s a good investment of your time to get to know the basics at least – what credit scores include, what they don’t, your rights as a consumer, and so on. Even if you never, ever plan to carry a balance of your credit card, it will pay off on things like mortgages and in rewards.

[Wesley_Clark]

@fluiddruid

Amount of interest paid does not factor into your credit score. “Too few revolving accounts” means too few credit cards or similar lines of credit – in other words, not like a car loan where you pay off a single transaction or creditor. It means that the guidelines for the particular card you applied for are looking for a more established credit rating.

It’s not hard to build credit, but it does take a little working at it before you can get the better credit cards. Try to pick a card you’ll be happy to stay with, because the length of time your oldest card has been open for does matter on your credit score. For this reason, store credit cards are a good bet; they’re easy to get, and they tend not to have things like annual fees like many subprime cards. Ones without a Visa or Mastercard affiliation will be easiest to get. You typically will not get approved for more than a few hundred dollars, but use it, pay it off each month, and your credit will rise. It’s best to pick a store that you can see going to often enough for them to keep your account open. If you already have credit problems, going for a secured card is probably the best route.

Getting good credit cards generally isn’t a one-time deal; you have to sort of build your way up. As you get better and better credit, you can get better and better cards. I actually have quite a few cards that I use for the rewards – a Chase Freedom card, a Discover card, a Costco AMEX, a Bank Americard … each one has slightly different features, often rotating each quarter, so I keep a little note in my wallet with the categories. You may laugh but I just filter all of the expenses I can through each card, never pay a dime in interest, and rack up hundreds of dollars in free money every year. There is such a thing as overdoing it – if you have way more credit than you need or could conceivably repay, it can be a ding to your credit, too – but other than my oldest account, I open and close accounts to chase the best benefits every few years, anyway. As long as you can trust yourself not to abuse the card, it’s a pretty easy way to get some nice rewards.

Some of the better cards (that require excellent credit) offer $200-300 sign up bonuses as well as 5% cash back during different quarters on different items. So that is nice, but I don’t think I can qualify right now. However getting a nice sign on bonus, getting 5% cash back on groceries and gas and building my credit at the same time sounds appealing.

FWIW I took the advice posted by kunilou and went to my bank to get a credit card application. In case I am rejected from that, on the website http://www.creditcards.com/no-credit-history.php they have a list of credit cards for those with ‘limited credit/no credit’, which I may be in. The APRs are higher but that isn’t a concern since I intend to pay it off each month. My main concern is the rewards options as well as no annual fee. But at this point I’ll settle for no annual fee w/o any rewards.

I have pulled my credit report in the past but I didn’t get a 3 digit score. I just got info on my accounts and what standing they were in.

For me the confusing part is that I was always told by the culture at large that credit cards are too easy to get. That they get college students to sign up for 3+ cards and go deep into debt. I don’t know if the credit card reform act of 2009 as well as the banking collapse of 2008 has made lenders more risk adverse or what. But I was under the impression that they pretty much gave credit cards away to anybody who applied before I tried to get one. But maybe, like mortgages, that is no longer the case. If so that is a good thing anyway.

[pulykamell]

@Wesley_Clark

For me the confusing part is that I was always told by the culture at large that credit cards are too easy to get. That they get college students to sign up for 3+ cards and go deep into debt. I don’t know if the credit card reform act of 2009 as well as the banking collapse of 2008 has made lenders more risk adverse or what. But I was under the impression that they pretty much gave credit cards away to anybody who applied before I tried to get one. But maybe, like mortgages, that is no longer the case. If so that is a good thing anyway.

Things certainly have gotten tighter. I have two credit cards with Bank of America (they didn’t start out that way, but with the consolidation of the industry, they all ended up with BoA) as well as a checking and savings account with savings greater than my combined limit on those two cards. My credit score is 800. I pay off my cards every month. Yet when I opened up a business card for my business expenses, they only wanted to give me $5K of credit, which is stupid, because if I need to rent equipment, I could need much more than that to secure a rental. (Which doesn’t actually get charged if you return the equipment in good shape.) And they lowered my credit limits on my two other cards, one of which was $16.5K (down to $7.5K), and the other was 8.5K (down to 4.7K). I got them to transfer $2.5K more of credit from one of my personal accounts to the business account, so my limits now are $7.5K, $5K, $4.7K, or almost $8K less than it was before.

Made no sense to me. Ten years ago, when I was less responsible with my money, they just kept raising my limits left and right, which is how I got to $16.5K on one card. Now that I actually have financial security with a golden credit score, they’ve signficantly chopped my credit. WTF? I should have just kept my mouth shot and not gotten that business card, because the existing $16.5K credit line would have served my business purposes better.