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Help! I can't even get a store credit card

 
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October 18, 2013
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QDear Erica,

Where can I get a rebuilder credit card? My credit isn't that bad, but I keep getting turned down (even from Kohl's), and my friend who works there said anyone can get a Kohl's credit card. When I was at the store, I applied but the lady said they could not give me one. Now I have no useful credit whatsoever except for my student loans, which are in forbearance because I'm not working at the moment. What can I do to get credit again? Thank you in advance. – Honey

AHi Honey,

To become eligible for any credit card, you must become the kind of person that issuers find attractive. Obvious, right? Well at this point in your life, it looks like you may be a rather unappealing customer. If you really want to put some plastic in your pocket again, you're going to have to sweeten your appeal.Ask Erica

There are two basic requirements for borrowing money: income and positive credit history. Because you don't have a job, it makes sense that you'd be rejected. Without cash regularly flowing in, how can a lender be confident that you have the means to repay any charges you might make?

I presume that you're trying to become employed, though, and if so, keep at it. When you meet that goal, you'll be in a better position to be eligible for a credit card.

But wait: The other part of the qualification equation is how you've met your past obligations. It appears you've had some problems. If your credit isn't “that bad,” it's not that good, so you'll need to clean it up enough so that it is.

For example, you may have some delinquent debts that are showing up on your credit report. A bank will see them (and your credit scores, which may being driven down by any bad debts) and consider you too much of a risk to do business with. Remember, it's not the store clerk at the register turning you down. The clerk simply instigated a quick credit check on you, and the system prompted her to deny you based on the information on your reports.

Your friend was partially right in that it's often easier to get approved for a store card than a regular bank credit card (although store cards do tend to have high interest rates and lower credit  limits). Still, if your credit reports are full of unpaid debts and bear the scars of student loans in forbearance, even the store's credit issuer might run.

Therefore, when you do get a job, the first thing you need to do is use part of your paycheck to pay old balances before approaching any new creditor.

Now about that student loan: If it's a large sum, that could inhibit your credit choices. Issuers may determine that you're overextended, meaning that you already owe more than you can financially handle. After all, when the loan's out of forbearance, you'll have to start paying. So even if you have an income, a substantial chunk of your check could be promised to the loan.

The very best way around such roadblocks is to be immensely reassuring to creditors — be it a retailer such as Kohl's, a credit card issuer such as Discover or a bank like Wells Fargo. After you do get a job and deal with lingering liabilities, save a few hundred dollars. You're going to use those funds to get what's called a secured credit card. These products are great for people in your situation. The money you put down in a deposit account with the bank becomes collateral, making you less risky than you were before. You can rebuild your credit by using the card to pay for a few things each month and then paying in full and on time, over and over again.

Then, when your student loan comes due, make those payments perfectly. They'll be factored into your credit scores, too.

As time passes, your credit rating will transform into loveliness — and your options for other types of accounts will multiply. Then, if you desire, you can gradually add additional cards to your life. Read over the current offers (as opposed to just taking a friend's advice), and choose a card that matches your needs and credit profile.

Got a question for Erica? Send her an email.


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