Secured and pre-paid credit cards offer viable options. But you should start building a strong credit history, so you can obtain a regular credit card on your own in the future.
First, you need to understand how credit card issuers determine credit worthiness. The approval criteria varies from among issuing banks, but generally relates to what's often called the three C's of credit: capacity, character and collateral. Capacity refers to your ability to pay based on your income and existing debt. Collateral refers to any assets you have that can secure payment, such as bank accounts or home ownership.
Character refers to factors like your payment history, length of employment, etc.
Character refers to factors like your payment history, length of employment, etc.
To get a good idea about how your application will fare with credit card companies, check your credit history with one of the major credit reporting agencies: Experian (www.experian.com), Equifax (www.equifax.com) and TransUnion (www.tuc.com). These agencies access your payment information directly from the companies you have credit with, as well as from government agencies such as the legal court system.
Credit reporting agencies use the information in your credit history to determine your credit rating or credit score.
Credit scores, also known as FICA or Beacon scores depending on the CRA, generally range from 350 to 850. Most banks will approve you for credit if your score is at least 620. If your rating is 720 or higher, banks will offer you their lowest interest rate.
Credit scores, also known as FICA or Beacon scores depending on the CRA, generally range from 350 to 850. Most banks will approve you for credit if your score is at least 620. If your rating is 720 or higher, banks will offer you their lowest interest rate.
Having a strong credit score should be a priority for any student. Below you will find five basic tips for helping you build your credit.
1. Make sure you pay your bills on time. A student's payment history is one of the most important aspects of building a good credit history. Not only will being timely on your payments help you build positive credit, but you will be able to avoid late fees and finance charges along the way.
2. Limit your credit applications. Every time you fill our a new application for credit, an inquiry will be made and your credit score will take a slight hit. Lenders see multiple inquiries as a sign of desperation or financial mismanagement. During the time you are trying to build or rebuild your credit, keep these at a minimum.
3. Keep an eye on your credit. Once a year, make it a point to request a copy of your credit report. Check for errors or any signs of identity theft. You are entitled to one free copy per year.
4. Keep your credit card balances low. If all possible, do not max out your credit card limits. Try to keep about 30% of your total credit line free to create an optimal ratio that credit score agencies use as part of there credit score calculations.
5. Stay away from cash advances. Withdrawing cash from your credit card is not smart for your overall financial credit building strategy. You will end up paying up to 5% plus any finance charges on your withdrawal.
