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This Credit Special Report was prepared with the
assistance of the United States Federal Trade Commission (FTC)
A major credit card is a great financial asset for you. It can be more convenient
to use and carry than cash, better security, and offers
valuable consumer credit protection under federal law.
At the same time, it's a big responsibility. If you
don't use it carefully, you may owe more than you can
repay, damage your credit rating and create credit problems
for yourself which credit repair can be quite difficult.
That credit report damage may easily result in your
future needs to get a credit card with no credit check
required!
Get the Discover® More Card
Your mail box likely gets lots of offers from national credit card issuers.
How do you know if the time is right for a national credit card or you will be approved
for credit if you apply? Here is some important information from
credit card cops credit watchdog web-site which
can help you determine whether you're ready for plastic, what to look for when you select a
company to do business with, and how to use your credit card in a responsible
manner.
Please note that this Credit Special Report was designed primarily for
U.S. and Canada residents. Many of the general principles discussed here are also relevant
in other nations.
Qualifying for a Credit Card
If you're at least 18 years old and have a regular source of income, you're
well on your way to qualifying for a credit card. But despite the invitations
from credit card issuers, you'll still have to demonstrate that you're a good
risk before they grant you credit. The proof is in your credit record. If
you've financed a car loan or other credit purchase, you probably have a record
at a credit agency (CRA) (The most common type of CRA is the credit 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.
Before you submit a credit application, get a copy of your report to make
sure it's accurate. Contact the credit bureaus listed in the telephone
directory under "credit" or "credit rating and reporting."
Because more than one credit bureau may have a file on you, call each until you
locate all the agencies maintaining your file. The three major credit bureaus
are:
- Equifax
PO Box 740241
Atlanta, GA 30374-0241
1-800-685-1111 .
- Experian (formerly TRW)
PO Box 949
Allen, TX 75013-0949
1-888-EXPERIAN (397-3742) .
- Trans Union
PO Box 390
Springfield, PA 19064-03090
1-800-916-8800 .
Anyone who takes action against you in response to a report supplied by a
CRA – such as denying your application for credit – must give you the
name, address and telephone number of the credit bureau that provided the
report.
Establish a Good Credit History
Suppose you haven't 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 issued by a local store and use it responsibly. Ask 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. 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.
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.
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.
If Your Application Is Denied
If you're turned down for a credit card, ask why. It may be that you haven't
been at your current address or job long enough. Or that your income doesn't
meet the issuer's criteria. Different credit card companies have different
standards. But if you are turned down by several companies, it may indicate
that you are not ready for a credit card.
If you've been denied credit because of information supplied by a credit
bureau, federal law requires the creditor to give you the name, address and
telephone number of the bureau 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 credit-worthiness. If you find an
error in your report, 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 and
also with the company that furnished the information to the credit bureau. This
may take some time, so you may try applying for a credit card with no credit
check, if you need a credit card fast while waiting for credit repair!
Get the Best Deal
Fees, charges, and benefits vary among credit card issuers. When you're
choosing a credit card, shop around. Compare these important features:
- Annual percentage rate (APR). The APR is a measure of the cost of
credit, expressed as a yearly interest rate. Check out the "periodic
rate," too. That's the rate the issuer applies to your outstanding balance
to figure the finance charge for each billing period. For example, if you have
an outstanding balance of $2,000, with 18.5 percent interest and a low minimum
monthly payment, it would take over 11 years to pay off the debt and cost you
an additional $1,934 just for interest, which almost doubles the total cost of
your original purchase.
- Grace period. This is the time between the date of a purchase and
the date interest starts being charged on that purchase. If your card has a
standard grace period you have an opportunity to avoid finance charges by
paying your current balance in full. Some issuers allow a grace period for new
purchases even if you do not pay your balance in full every month. If there is
no grace period, the issuer imposes a finance charge from the date you use your
card or from the date each credit transaction is posted to your account.
- Annual fees. Many credit card issuers charge an annual fee for granting you
credit, typically $15 to $55. Some issuers charge no annual fee.
- Transaction fees and other charges. Some issuers charge a fee if you
use credit cards to get a cash advance, if you fail to make a payment on time,
or if you exceed your credit limit. Some may charge a flat fee every month
whether you use the credit card or not.
- Customer service. Many major credit card issuers have 24-hour,
toll-free telephone numbers.
- Other benefits. Issuers may offer additional benefits, some with a
cost, such as: insurance, credit card protection, discounts, rebates, and
special merchandise offers.
Kinds of Credit Accounts
Credit grantors generally issue three types of accounts. The basic terms of
these account agreements are:
- Revolving agreement. A consumer pays in full each month or chooses
to make a partial payment based on the outstanding balance. Department stores,
gas and oil companies, and banks typically issue credit cards based on a
revolving credit plan.
- Charge agreement. A consumer promises to pay the full balance each
month, so the borrower does not have to pay interest charges. Charge cards, not
credit cards, and charge accounts with local businesses often require repayment
on this basis.
- Installment agreement. A consumer signs a contract to repay a fixed
amount of credit in equal payments over a specific period of time. Automobiles,
furniture and major appliances often are financed this way. Personal loans
usually are paid back in installments, too.
Protect Your Valuable Credit Rating
Once you get a card, sign it immediately so no one else can use it.
Note that the accompanying papers have important information, such as customer
service telephone numbers, in case your card is lost or stolen. File this
information in a safe place.
Call the card issuer to activate the card. Many issuers require this
step to minimize fraud and to give you additional information.
Keep your account information to yourself. Never give out your credit
card number or expiration date over the phone unless you know who you're
dealing with. A criminal can use this information to steal money from you, or
even assume your credit identity.
Keep copies of sales slips and compare charges when your bill
arrives. Promptly report in writing any questionable charges to the card
issuer.
Don't lend your card to anyone, even to a friend. Your credit
privilege and history are too precious to risk.
You're Responsible
While a credit card makes it easy to buy something now and pay for it later,
you can lose track of how much you've spent by the time the bill arrives if
you're not careful. And if you don't pay your bill in full, you'll probably
have to pay finance charges on the unpaid balance. What's more, if you continue
to charge while carrying an outstanding balance, your debt can snowball. Before
you know it, your minimum payment is only covering the interest.
If you start having trouble repaying the debt, you could tarnish your credit
report. If your credit report is negative you may still try to obtain a credit
card with no credit check required. A damaged credit report can have a large
impact on your life. A negative report can make it more difficult to finance a
car or home, get insurance, and even get a job.
Federal Protections
Federal law offers the following protections when you use credit cards.
- Billing errors on your credit card bill. You must notify the card
issuer in writing within 60-days after the first bill containing the error was
mailed to you. In your letter, include: your name; account number; the type,
date and amount of the error; and the reason why you believe the bill contains
an error. In return, the card issuer must investigate the problem and either
correct the error or explain to you why the bill is correct. This must occur
within two billing cycles and not later than 90-days after the issuer receives
your letter. You do not have to pay the amount in dispute during the
investigation.
- Credit Card Loss or theft. If you lose your credit or charge cards,
or if you realize they've been lost or stolen, immediately call the issuer(s).
By law, once you report the loss or theft, you have no further responsibility
for unauthorized charges. In any event, your maximum liability under federal
law is no more than $50 per credit card.
For Additional Consumer Credit Information
The US Federal Trade
Commission (FTC). works for the consumer – providing the information
needed to spot and avoid fraud and deception in the financial marketplace.
Access the more than 150 consumer publications offered by the FTC on-line at
www.ftc.org. Or get a
free copy of Best Sellers, a list of FTC publications, by calling
1-877-FTC-HELP, or by writing to Consumer Response Center, Federal Trade
Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580.
The Consumer Information Center
(CIC). publishes the Consumer Information Catalog which lists more than 200
booklets on a wide variety of subjects, including credit. Access the Catalog
and its large consumer knowledge data base. Or write: Consumer Information Catalog,
Consumer Information Center, Pueblo, CO 81009
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