Qualifying for a
credit card
If you are at least 18 years old, or 21 if a permanent resident of Puerto Rico, and have a regular source of income
or savings, you're on your way to qualifying for a credit
card. But you'll still have to demonstrate that you are a
good credit risk. The proof is in your credit history, which
lists the amount of credit you have received and if you’ve
paid it back on time.
If you are a full-time student, make sure to include that information on your credit application. Creditors often assign
full-time students lower initial credit lines to start their credit
files.
As you advance through college and graduate school, you
can always request increases to your credit line.
Building your credit history
So how do you establish your credit history? Even if you've
never applied for credit before, there are ways to start
building a good credit history:
1) Open a checking account or savings account, or acquire a debit card. These do not create your credit file,
but responsibly managing these accounts will indicate
that you have money and show something and demonstrate responsibility.
2) Apply for a department store credit card, gasoline card
or a major credit card, and use it responsibly. Pay each
bill on time and in full if possible (see below).
3) If you don't qualify for credit on the basis of your own
credit file, ask someone with an established credit history (like a parent or other family member) to co-sign
your application. The co-signer promises to pay your
debts if you don't.
4) Be responsible. Because credit cards make it easy to
purchase things now and pay later, it's easy to lose
track of how much you've spent. Make sure you pay all
your bills on time, and only get the credit cards you
need—don't get a card just because the issuer is offering a discount on purchases.
5) To establish and maintain good credit, pay at least the
minimum amount due on each account every month,
and pay on time. Allow five to seven business days for
payments made by mail. Better yet, take advantage of
on line bill pay services if possible.
6) Use your credit card wisely, and you'll have a very beneficial financial tool. Use it carelessly, and you'll run up
credit card debt you can't afford. Nothing is easier than
charging small things here and there, only to find yourself with a large bill you can't pay.
7) Keep close track of your spending. Get in the habit of
watching your banking activity daily through online
banking-monitor your account activity on a regular basis and arrange to make electronic payments.
Credit Card Terminology You
Need To Know:
Annual Fee
Some credit cards may have an “annual fee” they apply to your
card. Please see the terms and services agreement on your card
carrier for more information.
APR
APR stands for Annual Percentage Rate. APR is the amount of
interest you are going to pay on your card annually. Your first
credit card will always tend to be a high APR rate. The same goes
with bad credit as well. The better the credit score, the lower your
APR typically is.
Balance Transfer
A balance transfer is when you take funds from one credit card
and transfer it to another. Sometimes banks will offer promotional
rates to get you to switch.
Credit Limit
This is the limit that you are allowed to charge. If you charge more
than this amount, penalty fees usually are applied or your purchase may be declined.
Grace Period
A Grace Period is the time the customer has to pay off their balance. Grace period can range anywhere from 20 to 30 days. If a
payment isn't made after your grace period is up, late fees and a
higher interest rate can be applied.
Interest Rate
An Interest Rate is the rate the borrower must pay to borrow the
credit. This is paid on the ongoing balance.
Minimum Payment
The minimum payment is the amount you must pay each month to
avoid late fees or hurting your credit score. This number is a percentage of your outstanding balance and is relatively low to your
overall balance most of the time. Once again, this depends on the
card issuer.
Penalty Fees
These are the fees a credit company usually charges you. These
can vary from going over your credit limit to paying your bill past
its due date. Penalty Fees will vary from card to card.
Secured Credit Cards
A secured credit card is a card that usually requires a deposit to
be kept as collateral. Typically the deposit is the credit limit. Secured Credit Cards are ideal for people with bad or no credit.
Unsecured Credit Cards
An unsecured credit card does not require collateral for approval
and applications are approved based on your credit history, and
earnings.
About William
Moore
William’s combined expertise
represents over a decade of
experience in helping consumers improve their credit and
lower their debt!
Visit www.WilliamDMoore.com