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Rejected For a Credit Card? Try These 3 Simple Credit-Building Strategies

By U.S. News & World Report

Building credit can feel impossible. It seems as if you can’t get a credit card unless you can demonstrate that you use credit responsibly, but it’s difficult to show responsible credit use if you can’t get a card. If you’ve been rejected for a credit card and don’t know what you can do to prove your creditworthiness, here are three options that can help you get there.

[See: What to Do If You’ve Fallen (Way) Behind on Your Credit Card Payments.]

1. Secured credit cards. Most credit cards are unsecured. That means they aren’t backed by any sort of collateral, like cash or a large asset. If you have bad credit or no credit, you’re unlikely to get approved for most unsecured cards because the issuer will see you as a high risk. However, you have a better chance of getting approved for a secured credit card — a card backed by a refundable cash deposit, usually equal to the card’s credit limit.

Secured credit cards aren’t the same thing as prepaid debit cards. With secured cards, you make purchases and pay them off just like with an unsecured card. The deposit is there to protect the lender if you don’t make your payments. You get your deposit back when you close your account or convert it to an unsecured product. With prepaid cards, by contrast, you load money onto the card and then use that money to make purchases. Secured cards help you build credit. Prepaid cards do not.

A secured card also isn’t the same thing as a credit card from a subprime specialist issuer. While also marketed to consumers with poor credit, subprime specialist cards are unsecured and, according to a recent NerdWallet study, laden with extraneous fees. On average, secured cards save you $125 or more per year in fees compared with subprime specialist cards and have interest rates 9.15 percentage points lower.

If you want to use a secured card to improve your credit score, there are a few things you should do. First, try to use only a small portion of your available credit. Secured cards tend to have low credit limits to start with — often only $200 or $300 — so this may be a challenge. Put only one or two charges on your card a month and pay the balance in full every time the bill comes. And pay on time. A late payment will probably incur a fee, could lead your issuer to raise your interest rate and, if it’s late enough, might damage your credit.

[See: 10 Easy Ways to Pay Off Debt.]

Once you’ve improved your credit, you can ask your card issuer whether you can upgrade your secured card to an unsecured card. If that isn’t an option, choose an unsecured card appropriate for your new and improved credit score to continue building and maintaining a good credit history.

2. Credit-builder loans. Some smaller banks, credit unions and online lenders offer credit-builder loans. A credit-builder loan is an installment loan that helps the borrower — you guessed it — build credit. This is a great alternative for those who have a steady income but don’t want to, or can’t afford to, tie up money in a deposit on a secured card.

Here’s how it works: The money you borrow is deposited into a savings account, but you can’t access it until you’ve repaid the loan. Make your payments on time and fully repay the loan, and you’ll get the money and your timely payments will be reported to the credit bureaus. As with any credit product, late payments can also be reported to the bureaus, potentially hurting your credit score.

3. Authorized user status. If you have a friend or relative with excellent credit who’s willing to add you to his or her credit card account, authorized user status is a pretty easy way to build credit. An authorized user is someone given permission to use another person’s credit card account. Authorized users have no legal obligations to make credit card payments and aren’t allowed to make changes to the account. Activity on the account is reported to the credit bureaus for both the account holder and the authorized user.

If you decide to go this route, choose someone who never misses a credit card payment. Discuss ahead of time whether — and how — you’ll be expected to pay the primary cardholder for the charges you incur. Also talk about an exit strategy: When will you be removed from the account? Perhaps after you’ve achieved a certain credit score or when you qualify for a card on your own.

[See: 12 Simple Ways to Raise Your Credit Score.]

Getting rejected for a credit card is frustrating, but these alternative products can help you improve your credit, making it more likely that you’ll get approved next time. Remember, though, that it’s important to use credit responsibly and avoid any unnecessary interest charges, no matter which credit or loan product you’re using.

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Rejected For a Credit Card? Try These 3 Simple Credit-Building Strategies originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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