Got Credit? Many Millennials Don't

Editors' pick: Originally published Nov. 9.

Amanda Basse was denied the first three credit cards she applied for.

"I work in the hotel industry, and I couldn't get a credit card to book my own room," said the 31-year-old marketing coordinator and Florida resident, speaking to the irony.

Finally, after building up her credit through getting her own phone plan and paying bills on time, the valuable plastic came.

"I applied for a credit card nearly seven months later, and got approved," said Basse, who still only received a high rate - 27% ‑ card with only a $500 credit limit.

Many Millennials go through what Basse went through to get their first credit card, according to a study by ID Analytics. The numbers show 63% of Millennials don't have a credit card, even though they apply for credit cards at higher rates than Generation X-ers or Baby Boomers. The study found most are declined either because they don't have much of a credit history or because of low credit scores.

However, experts say that does not mean Millennials don't have options when looking for credit or to build credit.

"A person can start with a secured credit card," said Lori Askins, with credit repair and funding firm BR Finance Solutions. "These cards don't offer high spending limits, but they do help build credit.  They require collateral such as your bank account to be approved for this type of card."

Askins said another option would be to have someone — like a parent — add the Millennial as an authorized user to a credit card. 

"The primary cardholders actions will then reflect onto the authorized user and hence build credit, assuming the primary cardholder is responsible," she said. "Therefore, as the primary cardholder's credit score increases, so does the authorized user."

Millennials also could look to build credit through a savings secured loan — loans issued against a savings account, said Matthew Ure, southwest region vice president at Anthony Capital.

"This type of loan is very desirable for Millennials, because, though they often are criticized for their spending behaviors, there are a large number of them who have stashed a significant amount of cash away, often in the thousands of dollars," Ure said.

Such a loan can be done at a bank or credit union, and once taken out, the money from the loan should be put back into the savings account with payments set up to automatically come out, Ure said.

"This arrangement is continued for eight to 12 months, which should be long enough for the credit bureaus to notice that a financial institution has found you credit worthy enough for a loan," he added.

Once you have a card, it is important to keep your utilization low, as to continue to build good credit, said Julie Pukas, head of U.S. bankcard and merchant services at TD Bank.

"Your goal should be to never let your spending exceed 30% of your credit limit," she said. "The lower your utilization rate, the better your score will be."

Also, card users trying to build good credit should pay in full — each month and on time — as well as using your card only for needs and not wants.

"Prove you're responsible by only charging what you can afford. There is also no advantage to only paying the minimum amount due on your card," Pukas said.

"When you're still building credit, be judicious in spending and do not make purchases that you cannot pay off each month," she added. "Think of it as a loan to yourself and pay it back as soon as possible to avoid interest charges."

Askins adds Millennials also can pay to have an alternative credit score through one of the alternative credit bureaus — such as TransUnion, LexisNexis or Pay Rent, Build Credit (PRBC).  She said these bureaus build credit based on rent, telephone, mobile phone, gas and electric, television and insurance bills. Similar rules apply to building credit with these bureaus — paying on time, payment history and late payments.

And while it's hoped people won't abuse their cards, getting one can make a difference.

After a year, Basse was able to get her credit card company to lower her interest rate and increase her limit.

"Even thought I pay in full each month, I still feel like an adult not having that crazy interest rate attached to my card," she said.

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