You have the corner office view, or at least the cubicle and ergonomic chair, but your credit score is in a troublesome teenage period. It is quite a common paradox in the modern finance industry. You are rich enough to buy a Ferrari, but the bank considers you to ride a bicycle. Credit bureaus do not care about your status, they look for your history. You should prove to them that you have a boring long history of borrowing money and repaying them.
Without such history, you become the so-called “thin file”. Even having the money you think that it should be enough to get a credit card, but it is wrong. You may be able to pay for the bottle service in the VIP lounge, but the bouncer doesn’t recognize your face. That is the explanation why banks reject applications of rich but “invisible” people.
Secured credit cards are the simplest solution to get rid of that problem. You give the bank a cash deposit in exchange for the limit on your card. It is not a debit card because you put your money as a deposit, and spend the bank’s money. Use it for the gas or Netflix subscription, repay your expenses fully each month, and you get a new data point. Make it for six months, and credit bureaus will finally start considering you a responsible person.
There is another great solution to establish a credit history, it is called credit builder loan, an unusual financial product that works in a reverse order. Instead of getting money directly, the bank puts them into the savings account and you make payments to receive them. These products will allow you to build the history of timely payments and saving money simultaneously. The only issue is that sometimes banks set quite high interest rates, but you can find them using some apps such as Self or credit unions that want to help young executives.
One more way to get approved for the card is retail credit card, which approves almost everybody who is alive. It is not always a good idea because of the sky-high interest rate, usually above twenty-five percent. Using Best Buy credit card for any purchase is quite similar to borrowing money from the loan shark due to such rates. You should use secured cards or builder loans unless you are sure that you will pay your balance.
An authorized user status can be a great asset for many executives. Ask your parents to add you as an authorized user to their card that was opened in the Clinton era. Then you can benefit from their perfect history without paying any bill because you think they have set it up this way. Actually, it is a quick way to add years of history to your credit record, however, do not use this card for anything.
The main idea here is not to accumulate debts but to build credit history, i.e. establish trust relationships with financial institutions. Your credit score resembles a reputation score, and it has an extremely strict algorithm. Each on-time payment is an investment in your credibility bank, and each late payment is like you are taking money from this bank. So you should show the system that you can be responsible for borrowing small amounts of money to earn a chance to get bigger ones.
The patience is the most difficult thing here because you would like to get rewards instantly. You see all these Amex Platinum cards with various benefits, but you should wait. Usually, it takes about a year of persistent activity to transfer from the secured credit card to unsecured one with all these perks. After reaching that milestone, everything becomes much easier.