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Financial Friday: Lack of credit leads to denials

A low or non-existent credit score can impact your ability to obtain other financial products.
Credit: Getty Images/Adam Gault

GRAND RAPIDS, Mich. — Often, when you get to be in your mid to late 20s you begin considering buying a house, a new car, getting married, or other big life milestones. In many cases, those decisions come with financial changes too... and for many people currently in that stage of life, their credit score -- or lack thereof --  that has a negative impact. 

A study by bankrate.com in 2019 shows that 58% of Millennial's have been denied at lease one financial product because of their credit score. That's compared to 53% of Gen Xer's and 27% of Baby Boomers.

Analysts at bankrate.com say that may be one of the unintended consequences of the CARD Act, which was meant to help keep people from being taken advantage of. Credit card marketers are now not able to be on college campuses and the minimum age to get a credit card is now 21.  Those changes make it more difficult for people to get started early enough to have a good credit score when they need it.

Unfortunately, many of the things we pay for, like rent, utilities, Netflix, and cell phone plans, don't count as credit. Things are also compounded for those who make less. The study found that 36% of Americans with a household income of less than $40,000 a year have been denied a credit card. That's compared to 22% of people with a household income of $80,000 or more. 

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Ted Rossman, an analyst for bankrate.com recommends working together to help build credit early. Parents can often add a teenager as an authorized user on a credit card. This will help the teen build credit at a younger age and as long as the parents continue having good credit, that will transfer over to the teen. For parents worried about spending, many companies offer the ability to put a spending limit on authorized users. 

But, the good news is that there is never a point where it is too late to begin building good credit. "If you are new to credit, sometimes retail store cards, while they have higher interest rates, have lower barriers of entry so if you get, say you shop at Target all the time, and you get approved for that as your first credit card," Rossman says. "If you are paying it down every month, your using it and then paying it right down that will immediately start building good credit scores by using it." If you aren't new to credit, but would like to improve your score, there are ways to do that as well, like paying down your debts, paying on time, and not opening up more credit cards.

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