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Credit Cards: How to Establish Credit
Credit cards are a great financial tool, offering
many benefits:
- They can be safer and more convenient to use
and carry than cash
- They offer the ability to buy goods and
services now and pay for them later
- They have valuable consumer protections
under the law
- Major cards are accepted by merchants around
the world
- They may provide a source of cash or payment
in an emergency
- Credit cards can guarantee hotel or travel
reservations
- If you are not happy with a purchase you
made using a credit card, you may have the right to withhold payment until the
problem is resolved
At the same time, having a credit card is a big
responsibility. If you do not use it carefully, you may owe more than you can
repay, damage your credit rating, and create credit problems for yourself that
can be difficult to fix.
To qualify for a credit card you must be at
least 18 years old and have a regular source of income. Despite invitations from
card issuers, you will still have to demonstrate that you are a good risk before
they grant you credit. The proof is in your credit record. Before you submit a
credit application, you may want to obtain a copy of your credit report
to make sure it is accurate. If you do not have a credit history, learn how to
establish credit.
How to Establish Credit
A positive credit history is an asset, not only when you apply for a credit
card, but also when you apply for a job or Insurance, or when you want to
finance a car or a home. Here are three major ways to start establishing a
credit record for yourself:
- Consider applying for a credit card 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.
- 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.
Application and processing fees are not uncommon for secured credit cards. In
addition, secured credit cards usually carry higher interest rates than
traditional non-secured cards. If you are interested in applying for a secured
card, you may visit Capital One VISA as one of many possibilities.
- Consider asking someone with an established
credit history - perhaps a relative - to co-sign the account if you do not
qualify for credit on your own. The co-signer promises (guarantees) to pay
your debts if you do not. You will want to repay any debt promptly so you can
build a positive credit history and apply for credit in the future on your
own.
If you are turned down for a card, ask why. It
may be that you have not been at your current address or job long enough, or
your income may not meet the issuer's criteria. Different credit card companies
have different standards. However, if several companies turn you down, it may
indicate that you are not ready for a credit card.
Next ==>>
Types of Credit Card Accounts
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