Not everyone has great credit, which can make getting a credit card very difficult – unless they are open to other options.
If someone has been turned down for a traditional credit card, they might want to consider being added as an authorized user on someone else’s card, applying for a secured credit card, or finding a card issuer that will allow a cosigner and then finding someone willing to take that risk.
As an authorized user, a person is added to someone else’s credit account. The authorized user then gets their own credit card and is approved to make charges to that account. They can even help build their credit score if all payments are made on time. The main account holder, however, needs to keep in mind that they’re still responsible for making payments on the account and that failure to do so can result in their credit score taking a hit.
A secured credit card is easier to get than a traditional card and can be great for people with limited or poor credit, but it does require that the person makes a refundable security deposit – often the amount of credit allowed on the card. Someone with a secured card can charge up to the credit limit allowed and they will need to make regular payments on that debt. By making payments and paying off the card, a person can build their credit score. If they fail to pay their debt, their score will take a hit and their deposit will be used to cover it. Once that person qualifies for a traditional credit card, the deposit on the secured card will be returned.
Another option to qualify for a credit card would be to get a cosigner, but this should be done only if the card holder plans to always pay their debt. That’s because a cosigner becomes responsible for the debt if the main account holder doesn’t pay, and that can fray family ties or ruin friendships. The cosigner option can be helpful if the person applying for the card has a low income, has little or no payment history, or has a low credit score. Keep in mind, however, that not all financial institutions offer this option.
Consumers who choose one of these credit card options should talk with a financial institution about their opportunities and requirements. When used responsibly, each can be a way to build a credit history and to boost a credit score. But it’s vital to remember the importance of always making the required payments. Failure to do that can destroy your credit history and make getting other loans – much less another credit card – extremely hard to do.