Ready, Set, Credit

Obtaining a credit card can be a great financial tool. It is more convenient to use and carry than cash, and offers valuable consumer protections under federal law.

However, it is also a big responsibility. If you are not careful, you may owe more than you can repay, thereby damaging your credit rating, and creating credit problems for yourself that can haunt you into the future.

Chances are your mail is full of offers for credit card and card applications. How do you know when to go for a credit card? Here is some valuable advice that may help you determine whether you’re ready for the responsibility of a credit card, what to look for when you select a provider, and how to use your card responsibly.

Qualifying for a Credit Card

To qualify for a credit card you must be at least 18 years old and have a regular income. If you satisfy these two requirements you’re well on your way to qualifying for a card. Even if you get invitations from credit card issuers, you’ll still have to demonstrate that you’re a good risk before they grant you the card. To judge this, the issuer will rely on your credit report. If you’ve financed a car loan or other purchase, you will have a credit history. This credit history shows how responsible you’ve been in paying your bills and helps the credit card issuer decide how much credit to extend.

Establishing a Credit History

If you are young and have never used financing before, you will not yet have a credit history. How do you begin to establish credit? Consider asking someone with an established credit history — perhaps a parent or relative — to guarantee the account. The guarantor promises to pay your debts if you can’t. You’ll want to repay any debt promptly so you can build a credit history and apply for credit in the future on your own.

A positive credit history is an asset, not only when you apply for a credit card. It is also used by employers to judge your suitability for a job or by insurance companies, or when you want to finance a car or a home.

What to do If Your Application is Denied

If you’re turned down for a card, the creditor must give you a reason. It may be that you haven’t been at your current address or job long enough. Or, your income may not be high enough to be able to make the repayments. Different credit card companies have different criteria for lending. But if you’re turned down by several companies, it may be a good indication that you are not ready for a credit card.