Credit Cards

Credit Cards

In the last several years, credit cards have taken over as the standard method of payment. They’re convenient and, more attractively, they allow people to spend money they don’t yet have. Though credit cards can be wonderful when making large purchases or in case of emergency, you still need to keep in mind that they are an easy to way to get into crushing debt. Used wisely, they make life easier. Used badly, they do the opposite.


Applying For A Card

If you’re a minor, you can’t apply for credit cards at all. A lot of this information won’t apply to you yet, but it’s still good to know. If you’re eighteen or over, you can go ahead and apply. However, you are likely to be denied. This is because, when credit card companies are trying to decide whether or not someone is reliable enough to pay back credit card bills, they take a look at that person’s credit history. If you are eighteen, you will probably not have any credit history at all. Applying for a credit card with no credit history is like applying to college with no grades or test scores to show.

The easiest cards to be approved for are individual stores’ cards.


Credit History and Score

Your credit score is a number calculated by an agency to sum up how good or bad your credit history is. There are three agencies that do this — Equifax, Experian, and TransUnion — and they don’t always come up with the exact same number. Since you need to have a good credit history to seem stable to credit card companies, it’s good to know how to build your score up even before you have a credit card. There are a few ways to do this:

  • Get some bills in your name, and then pay them on time.
  • Go to your bank and ask for help getting a pre-paid credit card. (This is not the same as a debit gift card.) You will, of course, need money for this. Ask them how to use it to build your credit up.
Once you have a credit card, there are other things you can do to continue building a good credit history. Actually, to be more precise, there are things you should avoid.
  • Don’t open a lot of credit card accounts. Every time you apply for credit (whether a credit card, a car loan, or a mortgage), your credit score goes down for a period of time. This is a natural part of any adult’s credit history — we all need to apply for credit several times throughout our lives — but don’t do it more than you have to.
  • Don’t ever spend more than 20% of your credit line (the name for how much money you are allowed to spend with the card). If you’ve reached that point, pay part or all of it off before using the credit card more. I realize that it seems incredibly tricky for credit card companies to judge you badly if you use all the money they loan you. That’s because it is tricky.

Keeping Track Of Your Credit

You have a legal right to receive your credit report for free from two of the three credit reporting agencies once a year. You can get all three at once, or you can can spread them out so that you get a general idea of your credit three times every year. You can send for the reports by filling out the form at this link. Here are the instructions for where to send it and what to include:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

Please include with the attached form a copy of one item in EACH of the categories below in order to enable us to verify your identification and address. The item you submit from the “Identity” category MUST contain your Social Security Number and the item you submit from the “Address” category MUST contain your current home mailing address.

Identity
Social Security card
Pay stub with Social Security Number
W2 form

Address
Driver’s license
Rental or lease agreement/house deed
Pay stub with address
Utility bill (gas, electric, water, cable, residential telephone bills)

To ensure that your request is processed without delay, please enlarge photocopies of any items that contain small print (i.e. driver’s license, W2 forms, etc). To avoid additional delays, keep in mind that if photocopies you submit are not legible or contain highlighting, we may ask that you resubmit your request with more legible documents.


If you also want to know your exact credit score according to each agency, you will have to purchase it. myFico is the best place I’ve found to do so, and they also have an amazing forum for anyone who needs help building a good credit history or repairing a bad one.

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