Credit card companies are less picky than they used to be

The credit card industry is a strange business. They will turn down people with no bad marks on their credit report and then offer preapproved cards to people who have just emerged from bankruptcy court. Sometimes, there seems to be no rhyme or reason to how they work. But they do have their system and potential customers have to work with it in order to obtain a credit card. If you have previously had cards, it’s easy. But if you are new to the game and don’t have a good track record of financial transactions, it can be a lot harder.

Shop around and read the terms of all cards for which you apply very carefully. There are many “gotchas” in the fine print of the contract; some of them can be very expensive if you fail to heed them.

Here are some tips for people applying for credit for the first time:

Check your credit report. The lender will, and you might as well find out ahead of time what they are going to see. Even if you have no previous financial record, you should still check your report. It may contain errors, or you may find that someone else has been using your name to obtain credit for themselves through a process known as identity theft.

• You may wish to first apply for a credit card through your own bank. This will be particularly helpful if you have had an account in good standing for some time. They will have a track record of your deposits and withdrawals and that may help your case. Your limit may be small to begin with, but it can be increased over time.
• You may also wish to apply for a department store credit card. While less useful than a Visa or Mastercard, you can still make purchases. The interest rate will be higher than for other cards, so make sure that you pay your bill. If you buy something small every month or so and pay it in full right away, you should soon see good entries on your credit report. In time, you can use this “history” to help you obtain credit elsewhere.
• Secured card - If these plans don’t work, you can try to obtain a secured credit card. These are accounts that are backed up by a cash deposit that you will provide. Usually, the limit on the account will be determined by the amount of your deposit. If you give them $500, you get a $500 limit. Again, if you use the card regularly and pay your bills on time, you should establish good credit that you can use to apply for other accounts within a year or so.
• Make sure that you don’t apply for too many cards at once. This makes you look desperate and can hurt your credit score.

Establishing new credit can try your patience, as you will probably be turned down a lot before someone accepts you. Be patient; good things come to those who wait.

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