I am in my mid 20s and I just recently graduated medical school with a significant amount of debt from school alone (~250,000 in federal loans). I have a good credit score in the 700s but I can’t get a credit card because my debt to income ratio is so high while finishing my training in residency (~50,000 a year). I am just trying to get a credit card to help build my credit for the future. Any suggestions on how to get approved?
How do I get approved for a credit card with a high debt to income ratio from graduate student loans?
Good question. You could apply at your local bank or credit union for a secured credit card. You would want to ask them if they report to all 3 credit bureaus so you can improve your credit score with each of them. You would have to put your own money up as collateral on a secured card. You may start with a $200-$300.00 credit limit. You could put $10.00 a month on the card and pay it off in full on time. This will build a good payment history, which counts as 35% of your credit score. You could see if they would be willing to switch it over to an unsecured card after about a year or so of on-time payments. You could contact a certified credit counseling agency if you need help with options on your student loans. Good luck on your residency!
The quickest way to build your credit is by getting a loan or a credit card. Getting a “secured” credit card is your best option. These are credit cards that require that you deposit money into an account. Typically your credit limit will be identical to your deposited amount. For example, if you deposit $700, you will be issued a card with a $700 maximum credit limit. You should make charges each month, and make the payments on time each month. The lender will report your payment history to the credit bureau, this will automatically generate or increase your credit score.
Your score is partially determined by how much debt that you have compared to the amount of available credit. Therefore, keep balances less than 30% of your credit limit. For example, if your credit limit is $700, you should never carry a balance of more than $210. And, as mentioned above, always make your payments on time! Even if you are just making the minimum payment, pay it on time. Check with your local credit unions or banks to see if they have a secured credit card. For more information, visit Bankrate.com. Hope this helps!
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