Financial Education: Charge It Right

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Applying for Credit Cards

The applicant is the person applying for credit, that's you. The card issuer is the person approving the credit, the creditor.

Individual credit is based on your own assets, income and credit history. You are responsible for paying the credit card bill.

Joint credit is based on the assets, income and credit history of both people who apply. Married couples often apply for joint credit. You might obtain more credit this way. Both applicants are responsible for the credit card bill, no matter who makes the charges on the credit card.

Another requirement is that you must be 18 years old and have a regular source of income to qualify for a credit card.

Giving false information about your income or any other item on a credit application is a crime. It is fraud. You have to demonstrate you are a good risk before credit is granted. The proof is in your credit report.

A credit report is a collection of credit information. It is how creditors predict whether you will make regular payments on your loans.

Your credit report is kept on file with three major credit reporting agencies. Financial institutions report information about borrowers to the credit reporting agencies who compile information about you, the consumer. Banks in turn ask the credit reporting agencies for this information when you apply for a loan.

The three credit reporting agencies are:

P O Box 740241
Atlanta GA 30374-0241

P O Box 949
Allen TX 75013

760 West Sproul Rd P O Box 390
Springfield PA 19064-0390

You can contact any of these three credit reporting agencies to obtain a copy of your credit report. You might want to get copies of your report from each credit reporting agency. Each one could have slightly different information since lenders might not report to all three.

Basic information found in your credit report includes:

Identifying information: This includes your name, Social Security number, current and previous addresses, telephone number, birth date, current and previous employers and your spouse's name.

Credit history: This is your account record with different creditors. It shows how much credit has been extended and how you have repaid it.

Public record information: This includes items that are matters of public record including collection accounts, bankruptcies, foreclosures, tax liens, civil judgments and late child support payments.

Inquiries: This is a list that identifies creditors and other authorized parties who have requested and received your credit report.

Credit history and public record information demonstrate your willingness to repay your debts.

How do you think creditors decide whether to offer you credit?

Most credit card issuers use some form of credit scoring to help decide whether to make a loan.

The score is calculated using a scoring model or a mathematical equation that evaluates your employment data and payment history. The score is based on information contained in your credit report.

What should you do if your application for a credit card is turned down?

You will receive a denial notice, sometimes called an adverse action notice , that lists reasons for denying your application. If you don't receive this notice, ask your creditor. Reasons for denial might include:

  • You have a bad credit history
  • You haven't been at your current address or job long enough or
  • Your income does not meet the lender's criteria.

Different credit card issuers have different criteria.

If you are denied credit because of information on your credit record, federal law requires the creditor to give you the name, address and telephone number of the credit bureau that supplied the information. If you contact the credit bureau within 60 days of receiving the denial, you are entitled to a free copy of your credit report.

You have a right to dispute any inaccuracy in your credit report with the credit reporting agency and also with the company that furnished the information to the credit reporting agency. It is important to review all three credit reporting agencies to ensure they have correct information.

Let's imagine you have applied for and been approved for a credit card. The next important responsibility is paying your credit card bill.