Credit Cards 101-What are Credit Cards?
A credit card is a great financial tool. It can be more convenient to use and carry than cash and it offers you valuable consumer protections under federal law. However, it is also a big responsibility.If not used carefully, you may end up owing more than you can repay, damaging your credit rating and creating credit problems for yourself that can be difficult to fix.
Chances are your mailbox is full of credit card offers from issuers, each one trying to entice you into applying for their credit card. But, how do you know if the time is right for a credit card? Also, what should you know before you apply for one? The following information can help you determine whether you're ready for a credit card, what to look for when selecting a particular type of credit card and how to use your credit card responsibly.
How to Qualify for a Credit Card
If you're at least 18 years old and have a regular source of income, you are well on your way to qualifying for a credit card. However, even though you may receive many invitations and special offers from credit card companies in the mail, you still need to demonstrate that you are a good risk before such issuers will grant you credit. The proof lies in your credit record. If you've financed a car loan or other purchase, you probably have a record at a credit reporting bureau. This credit history shows how responsible you've been in paying your bills and helps the credit card issuer decide how much credit to extend.
Establishing a Credit History
Suppose you've never financed a car loan, a computer or some other major purchase. How do you begin to establish credit? First, consider applying for a credit card that is issued by a local store and use it responsibly. Ask if they report to a credit bureau. If they do and if you pay your bills on time you'll establish a good credit history.
Second, consider a secured credit card. It requires that you open and maintain a bank account or other asset account at a financial institution as security for your line of credit. Your credit line will be a percentage of your deposit, typically from 50 to 100 percent. Bear in mind that application and processing fees are not uncommon for secured credit cards. In addition, secured credit cards usually carry higher interest rates than traditional nonsecured credit cards. If these stipulations don't appeal to you, another option is to look at prepaid credit cards or debit cards.
Third, consider asking someone with an established credit history-perhaps a relative to co-sign the account if you don't qualify for credit on your own. The co-signer promises to pay your debts if you don't. You'll want to repay any debt promptly so you can build a credit history and apply for credit in the future on your own. An example of this type of credit is a student credit card designed specifically for college students. A parent or guardian will co-sign the student credit card, but the student will gain the benefit from having his/her credit activity appear on his/her own credit history report. Typically, student credit cards have lower credit limits.
A positive credit history is an asset, not only when you apply for a credit card, but also when applying for a job, insurance or financing for a car or a home mortgage.
If Your Credit Card Application Is Denied
If you are turned down for a card, ask why. It may be that you haven't been at your current address or job long enough, or perhaps your income doesn't meet the issuer's criteria. Different credit card companies have different standards. Contact the credit card issuer directly if you are unsure of their minimum credit requirements. However, if you are turned down by several companies, it may indicate that you are not ready for a credit card or that there is a problem in your credit history.
If you are denied credit because of information supplied by a credit bureau, federal law requires that creditor to give you the name, address and telephone number of the bureau(s) that supplied the information. If you contact that bureau within 60 days of receiving the denial, you are entitled to a free copy of your report. If your file contains accurate negative information, only time and good credit habits will restore your creditworthiness. If you find an error in your report, on the other hand, you are entitled to have it investigated by the credit bureau and corrected at no charge.
You should dispute any inaccuracy in your report with the credit bureau as well as with the company that furnished the incorrect information to the credit bureau.
Credit Card
credit card machines
credit card
Chances are your mailbox is full of credit card offers from issuers, each one trying to entice you into applying for their credit card. But, how do you know if the time is right for a credit card? Also, what should you know before you apply for one? The following information can help you determine whether you're ready for a credit card, what to look for when selecting a particular type of credit card and how to use your credit card responsibly.
How to Qualify for a Credit Card
If you're at least 18 years old and have a regular source of income, you are well on your way to qualifying for a credit card. However, even though you may receive many invitations and special offers from credit card companies in the mail, you still need to demonstrate that you are a good risk before such issuers will grant you credit. The proof lies in your credit record. If you've financed a car loan or other purchase, you probably have a record at a credit reporting bureau. This credit history shows how responsible you've been in paying your bills and helps the credit card issuer decide how much credit to extend.
Establishing a Credit History
Suppose you've never financed a car loan, a computer or some other major purchase. How do you begin to establish credit? First, consider applying for a credit card that is issued by a local store and use it responsibly. Ask if they report to a credit bureau. If they do and if you pay your bills on time you'll establish a good credit history.
Second, consider a secured credit card. It requires that you open and maintain a bank account or other asset account at a financial institution as security for your line of credit. Your credit line will be a percentage of your deposit, typically from 50 to 100 percent. Bear in mind that application and processing fees are not uncommon for secured credit cards. In addition, secured credit cards usually carry higher interest rates than traditional nonsecured credit cards. If these stipulations don't appeal to you, another option is to look at prepaid credit cards or debit cards.
Third, consider asking someone with an established credit history-perhaps a relative to co-sign the account if you don't qualify for credit on your own. The co-signer promises to pay your debts if you don't. You'll want to repay any debt promptly so you can build a credit history and apply for credit in the future on your own. An example of this type of credit is a student credit card designed specifically for college students. A parent or guardian will co-sign the student credit card, but the student will gain the benefit from having his/her credit activity appear on his/her own credit history report. Typically, student credit cards have lower credit limits.
A positive credit history is an asset, not only when you apply for a credit card, but also when applying for a job, insurance or financing for a car or a home mortgage.
If Your Credit Card Application Is Denied
If you are turned down for a card, ask why. It may be that you haven't been at your current address or job long enough, or perhaps your income doesn't meet the issuer's criteria. Different credit card companies have different standards. Contact the credit card issuer directly if you are unsure of their minimum credit requirements. However, if you are turned down by several companies, it may indicate that you are not ready for a credit card or that there is a problem in your credit history.
If you are denied credit because of information supplied by a credit bureau, federal law requires that creditor to give you the name, address and telephone number of the bureau(s) that supplied the information. If you contact that bureau within 60 days of receiving the denial, you are entitled to a free copy of your report. If your file contains accurate negative information, only time and good credit habits will restore your creditworthiness. If you find an error in your report, on the other hand, you are entitled to have it investigated by the credit bureau and corrected at no charge.
You should dispute any inaccuracy in your report with the credit bureau as well as with the company that furnished the incorrect information to the credit bureau.
Credit Card
credit card machines
credit card
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