Establishing Credit - Strategies and Guidelines

Establishing Credit may seem like a daunting task to a young person, but a good strategy can help take some of the sting out of the process.

Start by opening a checking and savings account in your name. This alone will not establish credit, but it will get you on the map and provide much needed credibility with financial and lending institutions. Keep accurate records of your checking account balance and make sure to never overdraw on your account. Bouncing a check will send up red flags with potential creditors and diminish the likelyhood of establishing credit. Good credit that is.

With a limited credit history you probably won’t qualify for a major credit card yet. Therefore you may want to consider opening a charge account with a large oil company (e.g. Exxon, Chevron, Mobil, Texaco) or a local department store (as long as the store reports to the three major reporting agencies). In general, oil companies and department stores do not impose the rigorous standards of performance as do the major credit card companies. So obtaining one of these cards will be much easier in the beginning.

Another step you can take in establishing credit is to put one or more of the household utilities in your name and pay the bill on time each and every month. Your responsible payment history will be collected by the three major credit reporting agencies
(Equifax, Experian, and TransUnion) which will help you establish a good credit rating.

Points to Remember When Applying for and Using a Credit Card:

How To Improve A Low Credit Score

If your credit score is below 700, you may not qualify for some of the best interest rates on credit cards, loans or mortgages. This means that just by having a credit score of 695, instead of 725 (just an example), you may end up paying thousands more in interest on any new credit you are granted, which you can avoid by just taking some simple steps to increase your credit score before applying for a new personal loan, auto loan or mortgage. It is widely believed that a credit score of 720 or higher is ideal.

How to improve a low Credit Score

If you have a recent bankruptcy on file, repossession, foreclosure, missed or late payments… it will take time to bring your credit score back up after such a blow. If you are in this position, in the mean time just be sure to borrow “within your means” (although you may have trouble getting approved for any new credit) and don’t overextend yourself. Keep paying your bills on time, and you will be back on the road to raising your credit score.

If you pay your bills on time, don’t have a recent bankruptcy on your record, and don’t have any missed payments or collections on file, look at your credit card balances. Normally you will want to keep your debt-to-credit limit ratio, on your credit card accounts, below 25%. If you owe more than 25% of your total credit limit on your credit cards, consider paying them down.

Example: if you have a credit card with total credit line of $10,000, and you have a balance of $2,500 on the card, you would owe 25% of your total credit line on that card.

Also keep in mind that even if you pay your credit card balance off each month, it still may be reported to the credit bureaus that you are carrying a balance on that card. It depends on what time of the month your credit card issuer reports to the credit bureaus, they will list whatever your balance is on the day they report it. However, most (if not all) lending institutions are aware of this, so this is generally not something to worry about.

Too many open credit card accounts

Also, too many open credit card accounts can be a bad thing. But, if you already have several open credit card accounts in good standing, don’t cancel them, the added “good” credit history can help your credit score. If you find that you have way too many open credit card accounts and you have decided to cancel some of them, be sure to cancel the most recently opened accounts. Keep the oldest accounts open. Normally the longer your payment history on an account, the better your credit score will be.

Try not to open any new credit card accounts that aren’t necessary. Generally when you open a new credit account, it will lower your credit score slightly, at least for a short period of time.

How you manage your “revolving credit” (credit card accounts) is a big factor in determing your credit score.

Newly Opened Credit Accounts

Usually your credit score will take a slight hit from newly opened credit accounts such as credit cards, auto loans, or mortgages. How many points your score will decrease depends on how many times you have applied for credit in recent months.

However, this decrease is only temporary, your score should rise again after several more months of making your payments on time. Normally this is not something to worry about, unless you have submitted many applications for new credit in a short period of time. That may indicate to credit issuers that you are beginning to overextend yourself (applying for too much credit), or that you are being denied credit and you keep trying other lenders hoping for a different result.

Short Credit History?

If you have a very short credit history (length of time you have been using your credit), that can also be a reason as to why you have a low credit score. Keep paying your bills on time and follow good overall credit management, and rest assured - with time - your score will rise!

No Credit History?

If you have absolutely no credit history, your credit score will most likely be low to start with. You can get started by applying for a credit card in an attempt to establish your credit history, or if you are trying to obtain an auto loan, but haven’t had any luck getting approved because of a short credit history (or no credit history), you can ask someone you trust to help you by co-signing on a loan with you.

These are just 2 of the ways you can start establishing your credit, but probably the 2 most common ways. When you are approved for your first credit account, be sure to pay your bill(s) on time, and you will be on your way to a better credit score!

Jake Rustenhoven is the webmaster of Freebie Credit Report, a site dedicated to providing useful information on different credit report related topics.

How To Use Your Credit Cards Wisely

Are you one of the thousands pulling your hair out trying to figure out how you’re going to pay your credit card bills? Using your credit cards wisely and sensibly will help you avoid financial problems and establish a strong credit rating, so here’s some information to help you get your credit card problems under control.

Credit cards are convenient for buying things now and paying later. Credit card companies are in business to make money. Don’t forget that every time you use your credit card you are borrowing money. You will pay a finance charge if you don’t pay off your balance each month.

Millions of people use credit cards to avoid carrying large amounts of cash, for emergencies, to track spending, etc. However, charging more than your income allows can be worrisome and potentially devastating to your finances and your credit rating. The pitfalls of credit card use are the accumulation of large amounts of debt and the inability to make more than the minimum monthly payment.

It’s important to look out for your own interests. Some credit card companies have lowered minimum monthly payments to less than two percent of the balance. It could take 30 years or more to pay off your credit cards if you pay only the minimum payment. Debit cards should not be confused with credit cards. There is no credit extended with a debit card. The money is deducted directly from your savings or checking account. The bottom line is don’t spend more than you can afford to pay on a monthly basis.

Limit the number of credit card applications you fill out. There will be an inquiry into your credit report for each application you submit. Your credit report contains a record of every company or institution that has evaluated your credit. It reflects negatively on your credit score if you have an inquiry that does not lead to the issuance of a credit card. Obtaining too many credit cards can affect your ability to finance other purchases as well, such as homes or automobiles. Too much available credit can cause suspicion in the eyes of a lender as to your ability to repay your potential debt.

Consider what you are looking for in a credit card such as the interest rate, annual fee, grace period, and credit line. Be wary of companies offering cards with a low introductory interest rate that often lasts for only a brief period of time, after which they become considerably higher. The average interest rate for credit cards is over fifteen percent. Choose a credit card with no annual fee. Credit card issuers are paid a percentage from the vendor each time you make a purchase. Many companies have waived the annual fee to attract customers. Avoid cards offering a high credit limit. There is great potential to overspend. Instead, pay down your balance before using your card to make additional purchases. Send in your payment well ahead of the due date. Issuers may charge late fees, and late payments could result in a considerably higher interest rate than the advertised rate.

So the bottom line is by using your credit cards wisely you can reduce adverse effects of credit cards and maximize the benefits by spending wisely, using self-discipline, and paying off your balance as quickly as possible to avoid unnecessary fees.

About The Author

© Noel Hynes is the owner of http://1st-for-credit-cards.com. Easy online credit card applications.

Contacting Creditors to Help with Credit Repair

Unfortunately, some people get into trouble with their credit. They miss some minimum payments on their credit card, or let a loan go into default. When this happens the creditor will report it a credit reporting agency, who will add it to your credit history. Once your credit history is blemished, it can be difficult to repair: most things will stay on your credit history for 7 years before they are removed.

Once you’re in a situation where you have a bad credit history, you’ll find yourself dealing with many previously unknown problems: you won’t be able to rent cars or purchase things online; landlords will hesitate to rent property to you; a mortgage may be difficult or impossible to get. This is why it’s important to engage in credit repair as soon as possible: you can do wonders for your credit repair by taking proactive an early action.

One of the best things you can do if you’ve fallen behind on payments is to contact your creditor. Many people, alas, take the opposite approach: they feel a sense of embarrassment or shame and avoid calls and contact with their creditors. This type of behavior is shortsighted and will result in long term credit difficulty.

The best thing you can do in terms of credit repair is to contact your creditor as soon as you run into trouble with a debt. Remember that the key to credit repair lies in your credit history report, and the report depends on whether or not your creditor reports you to the credit reporting agency. In most cases your creditor will be open to discussing alternate payment plans and solutions. Keep in mind that it is not in the creditor’s interest to push you away, as that could mean they get no payment at all. Instead, the creditor is likely to be open to discussing terms.

For these reasons you should always contact your creditor to ensure faster credit repair. Once you contact them, propose a payment system that is realistic both for you and the creditor. It is absolutely essential that you propose a payment plan you can stick to, and that you stick to it. The absolute worst thing you can do is default on these payments - if you do so it will seem like you were simply stalling to avoid payment from the creditor’s points of view.

In general, when contacting your creditors in regards to outstanding debts, remember that their decision as to whether to report your non-payment to the credit report agency will affect you greatly, and it is in your interest to do everything in your power to convince the creditor not to do this. By contacting your creditor early and proposing a realistic payment system, you take one of the most effective steps possible towards credit repair.

Drikus Botha is wellknown for his articles and e-courses. You can subscribe to one of his free credit repair e-courses right here.

Is a Student Credit Card Actually a Credit Trap?

Your bright-young-thing goes to college as a student, away from home for the first time, full of the thrill of freedom. And she needs money to spend. While teaching her to manage her money, very often the question is – is it ok to let her have access to huge amounts of credit in the first place? Is it OK to give her a student credit card? Credit card companies are among the first to line up at her door with their attractive offers including freebies, zero interest offers, etc. Before you know it, the student credit card becomes a family liability – a credit trap from which it is difficult to escape. What should one know about credit cards for college students in order to avoid this credit trap?

Pros and Cons of Student Credit Cards

Student credit cards are, in fact, more good than bad. Like anything else, one needs to learn how to choose and handle them correctly, how to position them as an opportunity to build a good credit history, and how to control their usage. A student credit card can be used to teach budgeting and finance as well as to allow flexibility in expenditure while making it safer to use than cash.

Joint Ownership of a Student Credit Card

You need to first see what kind of credit card is best suited for your teen. Some credit cards allow joint ownership between student and parent – that’s the one for you. Lay down a few rules about usage, including deciding on a budget and penalties for misuse. Pick up the credit tab regularly but allow the student to pay back some of the balance with their own earnings. This will encourage them to hold summer jobs and part-time jobs and learn to earn. The advantage of a joint card is that the parent gets a monthly statement which allows them to monitor all expenditures. That’s an opportunity for developing a sense of value in the young college student.

Credit cards for college students can have very low credit limits. This places a restriction on the total spend, forcing the student to think and plan their expenses. Parents can use these cards to show how the money spent needs to be repaid. It can also be an opportunity to teach budgeting to your child and teaching them to choose between what one needs and what one wants.

Student Credit Card Incentives

Companies that issue credit cards for college students also woo clients through attractive cash back or reward points schemes. Once the student sees value in spending intelligently, and pockets rewards for making the right choices, they may look for occasions to use the credit card knowing that there is repayment that is within his control. It allows them the freedom to make the purchases now, knowing that they have the ability to pay it all back in time. Above all, a student credit card becomes invaluable in times of emergency when cash and parents are far away.

So if you want to prevent your family and your teen from falling into the credit card debt trap, you need to first have a sensible and disciplined approach to credit cards yourself. Teens will sub-consciously follow your financial example and behavior patterns when they have access to a student credit card. Therefore, a student credit card can quickly become a ticket to financial freedom or it can deteriorate into a credit trap. The solution lies in giving limited exposure to your child by opting for student credit cards that offer joint ownership. Credit cards for college students are great opportunities for them to begin building a good credit history, which is an important consideration in their first jobs. However, if the teen gets confused signals and is unable to prioritize their budgets, then they will certainly head for trouble. Therefore, the first credit card used by your teen can become a credit trap as easily as it becomes an avenue to financial freedom.

For more information on student credit cards, Kim Stevens recommends that you visit student credit cards, Kim Stevens recommends that you visit www.CreditCardAssist.com

5 Things You Should Know About 0 APR Credit Card Offers

If you have received one of these offers in the mail, you know how tempting they can be. They claim that you will pay no interest on any purchases or balance transfers in the first period of owning your card. But there are some things about these offers you need to know before you sign on the dotted line and let them pull your credit report

1. The 0 APR offer is for a limited time.

Most credit card companies that offer the 0 percent interest rate deal only offer it for a limited time. This means that you will pay 0 APR for six months, nine months, or up to a year. You need to check the fine print for this information and be careful to notice it when the time is up.

2. The 0 APR offer might not apply to everything you put on the card.

Many cards offer 0 APR on all balance transfers and any purchases made during the introductory 0 percent interest period. But some only offer the 0 APR on balance transfers, and you pay a very high interest rate on any purchases.

3. The 0 APR offer might be null and void if you are not on time with your payment.

Most of these credit card offers are contingent on your being an exemplary member. This means that you have to pay your minimum payment on time every month during the introductory period or else you automatically lose your nice 0 APR and move up to a rate that usually ranges from nineteen to twenty-one percent interest.

4. The 0 APR offer might carry a ridiculously high interest rate after the introductory period is over.

Again, the rate of interest for these cards after the 0 APR is over usually runs from nineteen to twenty-one percent.

5. The 0 APR credit card will not repair your credit.

Remember that consolidating your cards or transferring your loan balance will help you pay off the balance without interest, but it will not remove the damage already done to your credit.

Rebecca Spitzer recommends Find Credit Cards for comparing 0 APR credit card offers. See www.findcreditcards.org/type/0-apr.php for more information.

Cash Back Credit Card – Some FAQs

It seems like a great idea to earn money while you spend it, isn’t it? But, is this possible or is it just a hoax? You can earn a lot of money with a cash back credit card. You can increment the percentage values of your income at the end of the year while using cash back credit cards. So use this article as a guide for choosing the best cash back credit cards.

FAQs for Cash Back Credit Cards

Here are some FAQs that may be of interest to you:

1. How can I get the cash back?

You must be thinking that any purchases made though the cash back credit card would reap immediate financial benefits for you - but this is not the case exactly. Even the balanced transfers and the cash advances are not enough to get huge amounts of cash back. Don’t just take a credit card with cash back facility for the sole purpose of getting cash back. You might need to doubly confirm if you will get money back for all purchases or not.

2. What amount of cash do I receive on cash back?

If you use a credit card with cash back facility then you would definitely like to get the most bang for the buck. One should check and do a bit of research before zeroing into a particular credit card for the best cash back solution. Always check if the cash back offer by the credit card company is worth your while.

3. Can the cash back value be increased over the course of time?

It is often found with credit card companies that they encourage you to increase the overall balance on the card. But there are some companies that insist their customers get a larger cash back amount. If you work out these details before selecting a credit card company, the deal may prove to be beneficial for you. You can negotiate such details to your complete satisfaction before signing up for the card.

4. How can I get hold of my cash back amount?

A good cash back credit card should give you rewards as frequently as possible. There was a time where people had to wait for the 12th month to get the cash back but not so anymore. Some credit card companies allow their customers to redeem their cash back as payments against their balance or as soon a fixed amount is accrued. Others prefer to adjust the cash back amounts against the next year’s fees.

5. What fees should I pay?

You should find a credit card that prevents you from paying a sum to get your cash back. Make it sure that your credit card does not charge you a hefty amount, which upsets any rewards that you might receive in the future. As compared to the other credit cards, you would definitely like to have a credit card that returns better cash back. Check that it does not have any hidden fees with it. You have to make sure of this while applying for any of these credit cards with cash back facility. It should absolutely not ask for a large fee that may eat into your reward points.

One should not forget that a best cash back credit card helps you to find the best of services awarded to you. Choosing a better credit card out of the other existing cash back credit cards depends solely on your awareness levels and smarts. So go right ahead, select a cash back credit card that helps you achieve your financial goals.

For more information on how to understand how a cash back credit card works, Rob Willis recommends that you visit www.CreditCardAssist.com

Getting Low Interest Credit Cards

Right now, there are a lot of people who are enjoying the freedom of getting and using low interest credit cards. Others are struggling, and slowly finding themselves starting to be overcome by the high interest rates on their cards. You know the story, at first, it wasn’t much, but now that you have added a lot of credit onto those cards, and frequently use the plastic, the amount you pay each month in interest has become a bill in itself - something that you do not need.

So, you ask, how can you get that low interest credit card? You know those ads for more credit cards are always coming in the mail (your email, too), and truthfully you’re more than a little tired of it. In fact, you have probably also noticed that the more money you owe - the more credit card applications you receive. Here are some steps you can take to get one of those low interest credit cards.

Look At The Percentages

While getting all of those applications in the mail, it is best that you take a few minutes to carefully read between the lines before applying. The promises may indicate a low introductory rate, often a gimmick used to get you to apply real quick - without reading the small print. Card companies will give a 0% interest introductory offer, and then it may go sky high after the initial offer is over. Even if you do not have that 0% introductory offer, but the card has, say, an 8% interest level for the life of the card - this latter offer could be the better one.

Many cards, the so-called cheap credit cards, may offer you a 0% balance transfer, and possibly even a 0% interest for a specified period. After that period, though, if you do not have it paid off - it may be time to find another cheap credit card to transfer your new balance to.

Look At The Conditions

In general, it is true that it takes a good credit rating in order to get one of the low interest credit cards. So, you may need to accept a little higher interest card than what you are hoping for, use it to get better credit, and then look for a low interest credit card after your credit improves.

Lately, some credit card companies have been raising the interest rates on credit cards for rather simple infractions. This could include anything from a single late payment, to paying your utility bills a day late. This is another matter to look into if you may be prone to make late payments. Know what the top rate of the card may be.

Look At Smaller Card Companies

The major cards, like Visa and Master Card, do not have to make such special offers - simply because they are the larger companies. But smaller companies, like Discover and American Express, make some really attractive offers in order to draw the new customers.

Look At The Rewards

Other cards, while possibly not being as low as some of the others, may offer you some good rewards. Of course, this type of card only has real value if you can benefit from the rewards. For instance, a card giving you free air miles is useless - if you never fly anywhere. While it may not lower your interest so much, the rewards could definitely save you in money elsewhere.

Another option is a card with Cash Rewards program. Usually this is given if you pay off the credit card debt with each month’s billing period. This is certainly an additional savings - even above the fact that no interest is charged.

Look To Reduce Your Rates

One thing that could be very helpful in you getting those low interest credit cards might be something real simple. Through surveys, it has been found that about 51% of the people that just asked for lower rates from their current credit card companies got what they wanted. This definitely is worth a try - whether you call them, or just write a letter asking about it.

Finding the Right Credit Card

There are so many credit cards out there to choose from that deciding which one to get can feel really daunting. What makes one offer better than the hundreds of others you’ve seen? Take this little quiz to find out what you should look for in a card.

First, Are You a Student?

If you are, then you’ll be best off with a student card – you’ll probably have trouble getting accepted for anything else. It would be best to contact the bank where you have your student account before you do anything else.

Do You Have a Balance to Transfer?

If you do, then you need to be looking for a card with a low APR on balance transfers – preferably one that stays low for more than a few months, unless you intend to switch often.

Are You Planning to Make New Purchases?

If so, then pay more attention to the APR for purchases, which is usually entirely different to the one for balance transfers. You should also look at what kind of grace period different cards offer, so you don’t end up paying interest on your purchases straight away.

Do You Pay Off Your Balance In Full Every Month?

If you have a lot of money or you only keep a credit card for emergencies, then you might just pay it all off each time you get the bill. If you do, then you’re in a position where you obviously don’t need to worry about the interest rate much at all, since you won’t be paying any interest (make sure there’s a grace period, though).

Many people don’t realise, but the credit card company still makes money from you even if you pay no interest – the money shops pay to be able to accept credit cards. The credit card companies want to give you some kind of reward for letting them make this money without causing them any trouble, and you basically have a choice of three things:

Get cashback. For always paying everything off, they’re quite willing to throw a few dollars your way. If you spend much with the card, this can add up to a tidy sum.

Take vouchers. You might, for example, be able to earn points as you spend that get you money off flights, or other rewards.

Give it away. If there’s a charity or other cause you support, the chances are that you can donate money to them using an affinity card. This is a credit card that gives a very small percentage of each transaction to your chosen cause, and over time it adds up to a pretty decent donation for them.

Take Your Time…

Don’t let anyone pressure you into making a decision before you’re ready. Any offer that says it’s for a limited time only is one you should ignore, as there’s no reason to do it other than as a sales tactic. Think hard about your spending habits and what you want the card for, consider all the options you can find and then, once you’re sure, go for it.

Ken Austin is the webmaster at Debt Consolidation Solutions and Credit Relief Solutions

Super Balance Transfer Credit Cards

Credit cards are a great way to spend money that you do not have and we all know that so it is nothing new to us. A credit card is a spending tool that many of us would feel as if we had had a limb cut off if we could no longer have one, would also ring true to a lot of people.

Start Making Money

There are ways to make money from credit cards, rather than them being a drain on your finances. One such way that many may do not know about is the 0% “Super Balance Transfer”, another step up from the 0% Balance Transfer, which lets you move your debt around to save you from paying interest charges. The 0% “Super Balance Transfer” allows you to pay other debts.

This is how it works, a 0% “Super Balance Transfer” can be used to pay off any debts that you have that are not credit card related. This is done by paying the money that you will get from the new credit card straight into your bank account, leaving you free to pay off any manner of debt that you have, this is where it differs from the normal 0% Balance Transfer facility.

You can pay off any debt that suits

This cash can also be transferred into your account even if you are free from any debt, which means that you can place your credit limit into a high savings account, then once the 0% interest period is almost over, you take the cash that the credit card company “lent” you and pay it back into and thus clearing the credit card debt. Always remember though that while this cash is lying in your savings account gathering interest you will still have to meet the minimum payment set by the credit card issuer, which is normally 2% of the balance or a minimum of £5.00.

The golden rule! Do not use this card to make purchases!

Once you have paid off the credit card you will be left with a profit for borrowing someone else’s cash, but what you have to remember is that you don’t spend on the credit card, this will only eat into the profits that are there to be made and could defeat the whole purpose of why you were doing it in the first place.

Finding the credit card companies who offer this service wont be too difficult, but most will require a fee to transfer your credit limit into your account, this will normally be a 2% charge to a maximum of £50, though you may find that a few credit card companies will not be charging as much as this.

Peter Kenny is a writer for creditcards-gb.co.uk.
For additional articles and an extensive resource for everything about credit cards and loans, please visit us at www.creditcards-gb.co.uk and www.creditcards2go4.com