Why Is It So Hard To Establish Credit?

Having a difficult time establishing credit? You’re not alone.

Hispanic and Latino families in the U.S. continue to face challenges when it comes to establishing financial well-being. According to Bankrate, there are continued, systemic barriers to wealth building – such as labor market discrimination – which result in Hispanic and Latino families being less likely than white families to own assets such as homes, businesses, and retirement accounts. This contributes to a significant wealth gap, with Hispanic family wealth amounting to just 21 cents for every $1 of white family wealth.

Let us read that again. 21 cents for every $1.

Why Us?

“In many cases, especially among first and second-generation Latinos and Latinas, they have limited knowledge of the U.S. financial system as a whole,” says Emanuel Rivero, senior director of the Hispanic Centers for Financial Excellence. “Managing a banking relationship, establishing emergency savings, building good credit and other basic functions worked differently in their country of origin, and they sometimes don’t know what questions to ask in order to get ahead.”

Why Do We Even Need Credit?

The U.S. economy runs on credit – and having a credit score is what fuels everything from getting a mortgage to applying for a car loan.

“Without credit, many of our necessities would be unattainable,” says James Lambridis, CEO of Debt MD. “In addition, credit and borrowing are the underlying principles that drive financial markets. This has always been and always will be the backbone of every financial institution.”

Establishing credit is not only a necessity for borrowing money – landlords, insurers and even employers may also look at someone’s credit information to determine how reliable that person is.

How To Build Credit

So what can you do to start building credit now? Here are 4 ways:

1. Apply for a secured credit card. It’s easier to get than a regular credit card since it requires a cash deposit – in case you get behind on payments. 
2. Become an authorized user. Perhaps ask a trusted family member/friend to add you to their credit card as an authorized user. Regardless of whether you use the card or not, it will appear on your credit report and help you build credit. 
3. Get a store credit card. These can be easier to qualify for – but be warned, store cards tend to charge higher interest rates. 
4. Must-follow rules. 1) Always pay on time, 2) Keep your balance to less than 30% of your credit limit, 3) Try to pay your bill in full each month.

How SUMA Can Help

Check out the Sumaversity to take some pointers to help your credit score!