Qualifying for a Card
There's no way to know if you'll qualify for a credit card without doing some research. Some of the basic things that lenders look for include:
Major Credit-reporting Bureaus
P.O. Box 740241
Atlanta, GA 30374-0241
- Experian (formerly TRW)
P.O. Box 2104
Allen, TX 75013-0949
760 W. Sproul Road
Springfield, PA 19064-0390
- Good payment record - If you pay your bills on time, you'll score major points with lenders. If you have a lot of late payments, this can hurt your chances of getting a card, and, if the lender decides to issue you a card, it's probably going to have a higher interest rate.
- Control of debt load - Lenders generally want to see that you are a good credit risk and that you aren't living beyond your means. Experts say that non-mortgage credit payments each month should not exceed more than 10 percent to 15 percent of your take-home pay.
- Signs of stability, responsibility - Lenders perceive things such as longevity in your home and job (at least two years) as signs of stability. Having a respected profession doesn't hurt either.
- Lack of credit inquiries - This one is a little strange. Whenever you apply for a credit card, the lender pulls your credit report from one or more of the major bureaus as part of the approval process. Each time a report is pulled, it's marked as an inquiry and stays on your credit bureau report for two years. Lenders perceive several inquiries on your report as indications that you're scrambling for loans and may consider you a poor credit risk. So, in order to beat this system, don't allow every credit-card issuer you speak with to pull your report.
- Lack of available or unused credit - Did you know that having credit cards that you don't use -- and have a zero balance on -- can hurt your credit? The rationale here, experts say, is that if you have all this available credit lying around, you could run it up at any time (even if you never have). Get rid of the cards you don't use. Be sure to ask the credit-reporting bureaus to remove the discarded cards from your report, noting that you -- not the creditor -- closed the account.
Once you qualify for a card, or several cards, there's always the chance that you'll end up spending more than you've got. A pretty good chance, actually. The next section discusses what you can do if you find yourself in credit-card debt.