How To Apply For A Credit Card
Perhaps you're ready to leave home and go out into the world on your own. Maybe you're off to college... or starting a new job. It's exciting for sure, but something important is missing. You don't have an established credit record. You never borrowed money before, so no financial institution has ever passed judgment on your credit risk. And, you don't have a credit card either... not even a gas card.
Ironically, sometimes having no credit at all is worse than having bad credit. When you're trying to get a car loan or rent an apartment the people you have to deal with want to make sure you won't cut bait and disappear. Even the utility companies want some sort of proof that you're worth taking a chance on. When you apply for a credit card you are attempting to establish good credit. One tactic is to get a student credit card and stay within the credit limit to purchase only the things you really need - like clothing and school supplies. Make prompt payments when the bills come due. Incidentally, it's not unusual for young adults to continue to use student credit cards long after completing college. Start small and stay within your means. Then, slowly expand your purchases as you understand the concept of paying down your outstanding balance in a timely manner. A history of late payments will quickly jeopardize your credit rating, so be diligent and don't wait until the last minute. You might wish to apply for a credit card that is issued by a local store, but make sure they report to at least one of the big three credit bureaus. Without this report, your purchasing habits won't help to establish a good credit history. One risk with these cards is that interest rates are usually quite high. Even if you don't use the card often, it typically appears as an outstanding credit item with the credit bureaus. Apply for a gas credit card. These usually restrict your credit limit, but they're relatively easy to qualify. Keep in mind that with these cards it's best to pay your balance in full each time you get your statement. You may find it necessary to get a secured credit card. These require you to deposit money in an account as security. Your credit line will be a percentage of your deposit, typically from 50 to 100 percent. More often than not, they will charge you fees and higher interest rates. If you default on your payments, the lender takes the money from your account Remember... when you apply for a credit card your primary objective is to establish a good credit pattern. So, be sure your credit card company reports your history to the three major credit bureaus. Push come to shove, you might consider asking someone (maybe a relative) with an established credit history 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. The first time you apply for a credit card, you don't always have the luxury of being too picky about getting the best interest rate. But, it's always good practice to compare credit card rates and fees. The general rule is the lower the APR the lower the cost of credit. Be especially aware of the notorious hidden charges. The Credit Card Danger Zone:
Don't forget... everything you spend must be paid back. Your credit report is an important asset. As you get older, your goals and objectives will likely expand - as will your need to utilize credit in a responsible manner. When you first apply for a credit card you are laying the foundation for the long term. Make the foundation as strong as possible and your excellent credit history will serve you well into the future.
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