Getting Your First Credit Card
by Tuong Tran
The World of Credit Cards | Getting Your First Credit Card | Choosing the Right Card | Glossary
A credit card can be an important tool to help you manage money and make life easier and more convenient. More importantly, having a credit card and using it responsibly can help you build a solid credit history. A good credit history is required to maximize your financial potential in the future when you want to get a major loan to buy a new car or house.
In this installment, iStudentCity puts together five proven strategies to help you get your first credit card. We also provide you with tips and instructions on what to do if your application is denied.
Your Credit Worthiness
To get your credit card, you must submit an application to the credit card issuer of your choice either online, by mail, or over the phone. Most credit card companies use some kind of credit scoring system to determine your credit worthiness. Although the scoring systems will differ from one credit card issuer to another since all credit cards vary in their standard of acceptable risk, the factors used in the scoring systems are the same. The most common factors include:
- Income - this is the primary factor affecting your capacity to pay your bills. The higher the income, the better the score.
- Occupation - professional occupations like CPA, doctor, engineer, and lawyer get better scores.
- Education - college and above get better scores.
- Length of employment - the longer you stay with the same employer, the better your score will be.
- Time at your current address - the longer you have lived at the same address, the better your score will be.
- Checking or saving account - having an existing bank account is an indication of your capacity to repay as well your ability to manage your financial asset.
- Rent or own - if you own your home, you get a better score
- Credit history - when you submit your credit card application, you also authorize the credit card issuer to review your credit history provided by one of the credit reporting agencies such as Equifax, Experian, or Trans Union. If you have already established a credit history, your credit file will show whether you have been making payment on time, the number of active credit cards or credit lines, and how often you apply for new credit cards. A good credit history should show that you always make payment on time, and have between two and four credit cards.
Strategies to Get Your First Credit Card
As an international student, you face a few more challenges than other first-time credit card applicants because of your lack of credit history, income, and residency. But this doesn't mean that your situation is hopeless. It does require that you do some homework before submitting your first application, so you can maximize your chance of success. To save you time and effort, iStudentCity has done some homework for you. Just follow the strategies below and you will likely get your first credit card in a few weeks.
Strategy 1 � Check with your school
Many schools and alumni associations offer their branded credit cards to their students and alumni. These are standard credit cards issued by a financial institution affiliated with the schools. Don�t forget to compare rates and terms before submitting your application.
Strategy 2 - Apply for student credit card
- A few credit card issuers offer credit card programs specifically to target college students. These credit cards does not require cardholders to have income or employment. They are generally approved for relatively low initial lines of credit. Most student credit cards carry no annual fee, and the APR is comparable to the standard credit cards from the same issuer. Despite the lower initial credit line, student credit cards offer you the same benefits as standard major credit cards, which make it a good starting point to build your credit history.
- It is a good idea to include a copy of your student ID card as proof of your student status.
- Some of the popular student credit card issuers are:
Strategy 3 - Open a premium banking account or an investment banking account that includes credit card as a feature.
- Some financial institutions such as American Express, Chase, Citibank, and Wells Fargo offer complete banking services including checking, investment, credit card, and bill payment service all in one.
- If you can maintain a high balance, it may make better financial sense to look into opening an investment banking account rather than a standard checking account. An investment account provides you with more options to better manage your financial assets.
Strategy 4 � Get a secured credit card
If you still could not get your first credit card with the above strategies, you may want to apply for a secured credit card. With a secured credit card, you are required to make an initial deposit into a bank account held by the card-issuing institution to secure your line of credit. The secured card can be used in the same way as a credit card with the same convenience and payment flexibility. It's a great "starter card" and helps you establish a credit history.
Strategy 5� Start with department store or other single purpose cards such as gas cards.
Many retail stores such as Sears, Macy, Circuit City and others offer their own credit cards. A good way to apply for a retail store credit cards is to buy a major ticket item and put it on credit. Your application can be approved in minutes for enough credit to cover your purchase, and usually you also get some additional discount on your first transaction with your newly activated credit card. Responsible use of these cards can also help you build a credit history.
No Credit, No Problem
Lenders are required by a federal law�specifically the Equal Credit Opportunity Act--to tell you in writing when you've been turned down for credit. Under this law, two important pieces of information must be included in the letter you receive when you are denied credit:
- The specific reasons why you were denied credit (or information on how to obtain those reasons); and
- If a credit report was used in making that decision, the name and address of the credit reporting agency that supplied it.
If your credit application is denied, take the following steps and improve the prospect of your subsequent application:
Step 1: Understand Why You Weren't Approved.
Lenders will usually tell you in the rejection letter the reasons you were turned down. If you don't understand the reasons given for their turning down your application, ask for more details. Sometimes it can be hard to pinpoint exactly why your application was not approved because these decisions involve a lot of different factors. Don't be shy about asking, though, since the information you receive may help you improve your credit profile so you can qualify in the future.
Step 2: Get Your Credit Report.
If the lender used a credit report in making the decision about whether to grant you credit, you are entitled to a free copy of your report. You must request it within 60 days of being turned down, so don't wait to order it. Read your report carefully to make sure it is accurate and complete.
If you do find mistakes, dispute them directly with the credit bureau. They are then required to investigate and make corrections, if necessary. If you believe that mistakes on your report led to the rejection of your application, you can ask the credit bureau to send a corrected copy to the lender. Follow up with the lender to find out if your application can be re-evaluated.
Step 3: Try Again, and consider asking for lower initial line of credit.
All lenders have different approval standards. Just because you didn't get a credit card from one issuer doesn't mean you can't get one somewhere else. Try again with another financial institution. Just don't apply for more than four or five cards in a six-month period. If too many companies reviewe your credit report in a short period of time, it can negatively affect your credit profile.
It's In The Mail
If it all goes well, you should receive an approval notice in the mail in 3 to 4 weeks. Your newly approved credit card is mailed to you inactive along with detail terms of agreement and user guide. Before you invite all your friends out to celebrate your first credit card, first do the following:
- Review the terms to be sure they are what you signed up for.
- Sign the back of the card.
- Call the activation number as instructed on your credit card.
- Memorize your PIN, and if possible, have your PIN changed to a number you can easily remember.
Ok, now you can celebrate, but don�t forget to check back for our next installment. We will give you the knowledge you need to realize the most benefits from using your credit cards.
The World of Credit Cards | Getting Your First Credit Card | Choosing the Right Card | Glossary
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