How to Apply for a Credit Card

how to apply for a credit card

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As tempting as it might be to do so, do not jump straight to the credit card application process before taking the necessary steps to check your own credit and fix any issues. If you do, you'll be taking yourself further and further away from your goal of being approved. Each time you apply for a credit card, it can and will temporarily lower your credit score, so do not apply unless and until you're fairly confident that you'll be approved.

Bad credit scores and history, or a "thin" credit history, might render you ineligible for the very best credit cards: ones that offer low interest rates, high limits and enviable benefits such as cash back, airline miles or reward points. But even with bad or no credit, it is possible to secure a credit card.

eHow asked Jodi Furman of the award-winning blog, LiveFabuLESS.com (link below) to provide readers with the details on how to apply for a credit card.

Furman has taught millions of readers a modern and doable way to live an upscale life without the price through her blog and TV appearances. She has an MBA from Columbia Business School and is a married mom with three young kids plus two dogs and two cats.

Get Educated

What's a credit score? A credit score is a three-digit number, between 300 and 850, derived from an analysis of your credit report. Lower scores denote higher risk, resulting in either a decline from creditors or much less favorable terms.

You have three credit scores, one from each of the three major credit bureaus: TransUnion, Experian and Equifax. The exact formula used to compute your score is not disclosed, but the five factors that determine your score are your payment history (35 percent), amounts owed (30 percent), length of credit history (15 percent), new credit (10 percent) and types of credit used (10 percent).

Pay close attention to the fees and interest rates each card charges, and make sure that the card reports to the credit bureaus.

— Jodi Furman

Check Your Scores

When you check your own credit score, it's considered a "soft inquiry," which does not negatively affect your credit score; when a creditor checks your credit, it's considered a hard inquiry, which does lower your score. Checking your own credit also gives an opportunity to identify and dispute any inaccuracies you find.

There is no free way to receive your actual credit score; all those "free credit score" places only provide estimates, also called "educational scores."

You can check all three scores for $40; see the link in the Resources section.

Your scores might differ from one bureau to the next because they might have different information from one another and they each use

proprietary scoring models, but they usually will be more similar than not.

You can check your educational scores from Experian and TransUnion for free, too (links below). Again, these are only estimates, not real scores, but they're still worthwhile, as they'll provide free advice that will help you improve your score.

Check Your Reports

You can get a free copy of your credit report from each of the three credit bureaus once every 12 months or after you've been declined credit. Credit reports contain all of the information that's used to compute, but do not contain, your credit score. The link to get a copy from each credit bureau is in the Resources section.

Do Some Housekeeping

Review all of the sections on each of your three credit reports. If there are any inaccuracies on any of your reports, you should dispute the information. The credit bureau has to respond within 30 to 45 days. If the bureau agrees that the information is inaccurate, or fails to respond, the information will be removed from your credit report, which will likely raise your credit score. You can also add a short (100 words or less) statement to your credit report where you can explain any issues contributing to your credit history.

Do Some Renovation

If possible, ask a creditworthy friend or family member to add you as an authorized user on her oldest credit card. Please note, she does NOT have to give you access to the actual card; she just needs to add you as an authorized user to the account. Doing so can accomplish two things: it can lend a better history and score to you and it can increase the average age of your accounts. You can also take out a very small personal loan from a bank and pay it back in full, demonstrating your creditworthiness.

Understand the Landscape

Here are some basic types of credit cards.

Unsecured: Generally reserved for those with credit scores above 650, they do not require a deposit.

Secured: Most people will be approved, but will have to come up with a deposit as collateral, held by the issuing credit card company to "secure" the card (you will get your deposit back in full when you close your account in good standing).

Prepaid: You transfer money to a card that you may then use as a credit card.

Pay close attention to the fees and interest rates each card charges, and make sure that the card reports to the credit bureaus.

Apply

If you have a high credit score (at least 650, preferably 700 and above), even without an extensive credit history, you will likely qualify for credit cards that have both low interest rates and enviable perks such as cash back.

Source: ehow.com

Category: Credit

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