__By Jason Steele __
Secured credit cards are designed for people with significant credit problems and those with a very limited credit history. Even though it’s easier to be approved for a secured card than an unsecured card, it’s not a sure thing.
If you’ve applied for a secured card, submitted your security deposit and still weren’t approved, don’t give up hope.
Here are 3 steps you can still take to build or rebuild your credit so you could get approved in future.
When you apply for a job, or even when you ask someone out on a date, you might never know why you were rejected. But when it comes to credit cards, the law requires card issuers to give you a reason you were denied.
This is called an adverse action notice, and it’s part of the letter you receive after being denied a credit card or other type of loan. This notice lists the reason or reasons your credit card application was denied.
Common reasons for being denied a secured card could be:
Most credit card issuers won’t offer a secured credit card account to applicants who have a pending bankruptcy or foreclosure, and some even require one to be discharged for at least one year before you can be approved.
But in some cases, your application could be denied simply because the card issuer was unable to verify your identity or your address.
Unlike standard, unsecured cards, there usually isn’t a minimum credit score required to be approved for a secured card. That’s because a secured card is specifically designed for people who have had serious credit problems.
Card issuers will use different standards to approve or deny applications, but credit score usually isn’t one of them.
Some reasons for denial can be easy to fix, such as discrepancies in your address or identity. Learn how to read your credit report so you know whether it has the correct information.
For example, if you recently moved or changed your name, you may be able to offer the card issuer some documentation to remedy the problem. If you mistype your Social Security Number, date of birth or other personal information, these errors can be easily fixed.
It could be more difficult and time consuming to fix an account that’s currently delinquent or in default however. And it might not be possible to correct the problem if your application was denied due to a recent bankruptcy or foreclosure. (Read how to rebuild your credit after bankruptcy.)
Once you’ve taken a corrective action, contact the card issuer you applied to and ask to have your application reconsidered, or apply again for the same card or a different secured card.
If the card issuer continues to decline your application and there’s no way to correct the issues they cite, don’t continue applying. Use a different strategy to rebuild your credit instead.
If you were denied a secured card and aren’t able to fix the reason for the denial, there are other things that you can do to improve your credit.
For example, become an authorized user on another person’s account, typically a family member. This is when a credit card holder requests a card for you under his or her account.
The primary cardholder remains solely responsible for repayment of the account, but their account will appear on your credit report, and could improve your credit score.
Another way to build your credit is by taking out a credit builder loan through a bank, credit union or through Self Financial.
Often, these loans don’t require a credit score to get started, and can be used by someone recovering from bankruptcy or foreclosure, unlike many other credit options.
You usually just need a bank account, debit card or prepaid card to make payments.
Once approved, the loan funds are deposited into a Certificate of Deposit (CD) account, and you make regular payments towards that amount. Once all of the payments are made, you’ll receive the money, minus finance charges and administrative fees.
In other words, you don’t get the money upfront, so it works a little more like a savings account than a loan.
With a record of on-time payments, a credit builder loan can add positive history to your credit report and could increase your credit score.
A Self Credit Builder Account also provides a clear path to be approved for the Self Visa® secured credit card.
All you have to do is:
Once you meet the criteria, you can set your credit limit and get your Self Visa Credit Card.
Decide not to use Self? That’s fine too. Hopefully by turning to these alternative methods for building credit, you’ll have more credit options available.
Rejection never feels good, but there are other options when you are denied a secured credit card.
By trying to fix the problem that caused you to be denied, or looking for other ways to build credit, you could improve your credit history and unlock access to other credit products in future.
Jason Steele has been writing about credit cards and personal finance since 2008, poring through the terms and conditions of credit card agreements to understand the minutiae of how these products work. His work has appeared on Yahoo, MSN, HuffingtonPost and other major news outlets. In his free time, Jason’s a commercial pilot. He graduated from the University of Delaware with a degree in History.