Today, getting a credit card is harder than getting an auto loan for a variety of reasons. Just ask a young adult who has no credit history, or a recent immigrant to the United States whose credit in their native country cannot be accessed. Anyone who has recently declared bankruptcy or who has a very bad credit score can also attest to the fact that you can get a car loan much more easily than you can get a credit card. It may not be a huge car loan and the interest rate may be very high, but you can definitely get one. Getting a credit card may be harder (although really almost anyone can get approved for a credit card if they consider applying for a secured credit card or a bad credit credit card).
The Impact of The Economy
With today’s economy you will find that it is hard to get any kind of credit. Banks and other lenders have severely tightened their guidelines for lending. This comes following many years of very liberal lending guidelines. Credit was extended too often to people who had poor credit ratings.
Excessive amounts of credit were extended to those who had good credit, until they were in over their heads. Combined with the downturn in the economy, the drop in housing values and the rising unemployment rate, the default rate on credit cards, loans and mortgages has gone through the roof.
Lenders are now overly stringent with their rules. You will find that while it is difficult to get a good auto loan at a decent rate, it is even harder to get a credit card. This is especially true for those whose credit is less than ideal. However, there is still hope.
Secured Versus Unsecured Loans
A secured loan is one that has collateral to back it. Car loans, boat loans, home loans and any other types of loans for high-dollar, resalable goods are secured loans. The company that gives a loan of this type is, in effect, co-owner of the item and, if the loan is not paid, the lender can seize and sell the property to recoup its losses.
Unsecured loans are loans which are not attached to specific goods. Credit lines, credit cards and certain other types of loans fall into this category. They are issued in good faith, based on your credit score, income and other factors, with the belief that you will pay off charges that you incur with them. Because they do not have goods attached to them, typically the interest rate is higher than that of secured loans and they are somewhat harder to attain.
Realistically, a secured loan is much less risky for a credit issuer than an unsecured loan. If you have a less than ideal credit score or have little credit, issuers see you as more likely to default on the credit card payments or even to declare bankruptcy. In such cases, the credit card company is out money and has very little recourse for recuperating it. However, if you have an auto loan and you don’t make payments, the credit issuer can repossess the car and get back a sizeable portion if not all the money owed.
Using an Auto Loan to Get a Credit Card
One of the advantages of being able to get an auto loan is that it will allow you to build your credit. If you have poor or practically non-existent credit, go ahead and get a small car loan. Make sure it is one that you can easily afford. Be sure to always make your payments on time and before you know it, your credit score will be increasing. Credit card issuers will look at your credit history and how you handle credit before giving you a card. By handling a car loan responsibly, you will be on your way to getting the credit card you want.
If you are having a hard time getting approved for a credit card, there are two different types of card that you may want to consider. The first is a secured credit card. With this type of card, you must deposit your own money as a security with the credit card company. Your money is tied up; but, it is an excellent method of building credit. Alternatively, you can get a credit card that is specifically for those with bad credit. These high risk cards are also a handy way to improve your credit, however there are hefty fees if you are late or over the limit when using them.
When you have reinforced your credit score by dutifully handling your auto loan responsibly and are ready to get a credit card, let our credit card chaser tool help you. It helps you find the different cards that are available to you and presents the benefits of each in an easy-to-compare format. Get started now putting the credit card chaser to work for you and find the best credit card for your needs now!