Unfortunately, getting credit is often a no-win situation because you have to have a credit file to get it. This can be very frustrating, especially in desperate situations. Most people start building their credit report with a credit card, but if you do not have a credit report at all (good or bad), how can you get a credit card? Thousands of people (if not millions) are in this same situation – you are not alone!
The good news is that since many people are in this situation, lenders have to find ways to better serve those people who want to build or rebuild good credit. Here are some tips if you find yourself in this situation:
You will never be short of options
Even if you have bad credit or not a lot of history, that does not mean that you have to accept the offer of the first credit card company you receive. It’s true that your options will probably be limited compared to an individual with a good credit rating, but if you shop around for a bit, you should be able to make the best choice and this will help you in the long run.
Your number one priority in this situation is to make the right choices about the options that come up. Get your credit report for free for a better overview of your financial situation. It might not be as bad as you think, or maybe you’ll open your eyes to realize if you’re really in a bad situation. This information will also help you choose a company with which to obtain a credit card.
The ABCs of Credit Rating
In Canada, credit scores can range from 300 to 900. Here’s how to interpret your rating and evaluate what your options are:
A rating of 500 and under
Unfortunately, with such a rating, you will have a lot of trouble getting a credit card. If you have been assessed under 500, you may be in one of two situations: either you are new to the business and you do not have enough credit history or have had financial difficulties in the past and have made bad choices. If you are a young student, you have nothing to fear: many companies offer credit cards just for this. On the other hand, if you have recently gone bankrupt or paid a debt, you would be better off looking for a secured credit card.
A credit card guarantee requires a deposit of funds that reduces the risk borne by the lender. This deposit is equal to the credit limit you will have access to. As with any other credit card, be sure to shop around and do your research before signing. Not all banks offer such a service and they will all have different advantages and disadvantages. Finally, make sure that the company with which you will obtain your credit card relates to credit bureaus to guarantee you an improvement of your credit rating.
A rating of 600
With such a rating, you will have greater ease in being approved for a credit card, but you will still be considered to be at high risk for the credit company. Your choice will be somewhat limited and you will have to expect a higher interest rate than the average. On the other hand, you will be able to restore your solvency more easily and then obtain more competitive interest rates.
A rating of 650
When you reach 650 and over, you will be even easier to get a credit card and your primary goal in this moment will be to increase your rating to over 700, because that’s when interest and fees will be lower and you can save.
Now that you have been able to obtain a credit card, you must make sure to use it with caution and responsibility. Always pay the full amount of the barnacle to maturity so you do not lose control of your debt. If you pay the total amount on time and keep the proportion between your available credit and your lowest balance possible, you should see your credit rating increase.
Whatever the credit card you will get, your goal will be to improve your credit rating to get better interest rates and other loans in the future. It will not be easy, but with a little effort and perseverance, you can do it.