Credit or "financial trustworthiness" is the most important factor lenders consider when you apply to borrow money. A good credit score can actually
help you get better terms and lower interest rates as many lenders offer
better terms and lower interest rates to consumers with good credit ratings.
Know the basics now and start increasing your credit score!



Instructions
Step
1
Avoid going over your limit and control spending on your credit card.
A good guideline is never to borrow more than 20% of your annual after-tax income. Credit analyst know the average percentage of your annual income that you can safely allocate for debt payment and they will give you more points if you stay within the safe side.
Step
2
Never let your monthly debt payments exceed 10% of your monthly net income. This is a safe figure that comes from a good budget. Creditors want you to have enough allowance just in case you exceed the regular household budget. They will give you more points if they know that you are more likely to have more "elbow room" to maneuver your budget.



Step
3
If you use a credit card, pay your bill on time. You get points by paying at least the minimum amount due by the due date, you avoid a late fee and you prevent possible damage to your credit record. Making this a habit can do wonders for your credit score!
Step
4
Avoid applying for credit. Applications you make for credit cards, store cards, and catalogs etc. will actually lower your credit score. They show up as inquiries on your credit report, indicating to lenders that you may be taking on new debt. Apply for and open new credit accounts only as needed and don't open accounts just to have a better credit mix.


Step 5

Don't close unused credit cards as a short-term strategy to raise your score. Closing credit card accounts do not give you positive points in the credit score equation. Creditors simply don't view it as a good sign of financial stability. Closing an account doesn't make it go away, it will still show up on your credit report and it would be better to use the credit you already have to prove your ongoing capacity to manage credit wisely and responsibly.

How to Get a Credit Card when You Have a Low Income

from wikiHow - The How to Manual That You Can Edit

There are many ways to obtain a credit card. In fact, obtaining a card is dependent on your past credit history, as well as your income. But if you do need a little "income boost" to get through the application process, here are some things you can do.

Steps

1. Before applying for any type of credit, it helps to know where you stand ahead of time. Aside from just income, creditors look at things like your debt ratio to determine if you can afford the amount of money they are loaning you. Debt ratio is determined by comparing the amount of money you make per month versus the amount you spend per month.
   
2. Obtain a credit report from one of the credit bureaus, either Experian (888-397-3742), Trans Union (800-916-8800), or Equifax (1-800-685-1111). You can also take advantage of http://www.annualcreditreport.com to obtain your free yearly report. Make sure everything, past creditors, balances owed, late payments, etc. is accurate. With that out of the way, you can begin the application process.
   
3. Figure out how your debt ratio looks. If you make $1000.00 a month and spend $975.00 a month, you have a very high debt ratio because you are spending nearly 100% of what you make, with no cushion. Creditors will be skeptical about loaning money to you. You can fix a troublesome debt ratio either by a) making more money or b) eliminating some expenses. Sounds easy enough, right?
   
4. Making more money might sound like an obvious solution, but it is probably not the easiest. However, keep in mind that credit card applicants are asked to list their household income. Household income is defined as any amount of money that could be used for purposes of reimbursement of the credit card. Here's where you can get a little creative without being dishonest.
   
   
   
   
5. If you have a spouse, consider whether or not his or her money would go toward the monthly payment should you get in a jam. If the answer is yes, then you can viably include that income in the total. Many times this is sufficient, as it can take your measly $12,000.00 a year to about $24,000.00 a year... a significant difference! The same principle could be applied to parents or even long-term roommates if needed.
   
6. If you live alone, think of all the little ways you make extra money throughout the year. Maybe you have a musical talent and get occasional gigs at the local bar. Maybe you're a diligent eBay-er. Maybe your neighbor is sometimes slipping you a twenty to mow her puny little lawn for her. While these are not million-dollar enterprises, a lot of littles can go a long way! Fifty here, a hundred there, twenty here, ten there... right there is almost $200. Estimate your side jobs for the next year and include this in your annual income.
   
7. Increase your odds at low-income credit attainment by reducing your expenses. Look on your credit to see if there is anything listed that is not a necessity right now. That jet-ski you pay $100 a month for that you haven't used since two summers ago, for instance, probably isn't a matter of life or death, so get rid of it. Don't worry, they'll still be making jet-ski's in three years when you can actually afford one.
   
8. If you already have credit cards, consider transferring some of the balance of higher interest cards to lower interest ones, which will save you money on your minimum monthly payment. Keep in mind it looks good not to have all your credit lines maxed out, so try to avoid piling everything onto one card if it is going to fill it up. The best practice is to keep your payments split among different credit cards. This keeps your debt ratio low and helps increase your credit score faster.[1]
   
9. If you don't have a checking account, open one. Even if you can only put $30 in it. Many creditors will frown on applicants who don't even have a viable way to pay their bill. Once you've got that done, open a savings account. Again, even if you can only put $10 in it. The credit card application will ask you if you have one or both, and having both is really good... it makes them think that you must have money leftover, tucked away in case of emergency. They don't have to know there's only $10 in it, and luckily, they don't ask!
   
10. Get all your facts together and get ready to apply. Applying online is much easier, and less intimidating. Those credit card phone reps are just reading a script, and they read so darn fast it makes you confused! Plus, many sites will give you your answer right away. You'll need personal info like name, social, mother's maiden, etc. Then you'll need financial info, especially how much money you make, what type of accounts you have (checking/savings), how long you've lived at your current residence (it helps if you've been there a year or longer), and the like. Having it all on hand ahead of time save frustration at having to dig for something new at each new question.
    
    
    
11. Once you've filled out the application, submit it and await a reply. With lower income, if you are approved, it will probably be for a lower credit line (sometimes only $300) until you've proven yourself as a responsible customer. Pay on time every time. Pay more than the required minimum, and before you know it, your new credit card company will have you flashing plastic wherever you go.
    

Tips

• Remember no matter what, it is considered fraudulent activity to lie about anything on your credit application. As a creative consumer, however, you can sometimes determine what pertinent facts would require significant investigation on the part of the creditor, should you feel you need to "fluff up" the facts a little.
  
• Credit unions, while tough to get accepted, have some of the best rates and policies, so keep them in mind once you've established a solid (not extravagant) income and spending pattern.
  
• Apply for fixed-rate cards when you can, so you know there'll be no surprises if the Fed decides to jack up the Prime rate (and coincidentally, your credit card rate).
  
• Don't be intimated to go to a bank and speak to a teller. If you have some unique circumstance that you can't explain with online credit forms, you can easily talk to a bank manager and explain your situation.
  
• If you can't find a good fixed-rate'er, at least take advantage of the many 0% introductory interest cards. But watch out, read the fine print and the information matrix on the back of the offer to see what the rate goes to after the Intro period is over. Sure it may be 0% for a year, but if it goes to 29.9% after that, its not a good deal!
  
• When asked about your living situation, you can choose "Own" if you live in a house that another household member owns, even if your name isn't on the deed. When it asks for your monthly housing payment, type in only what you pay, not what the full mortgage or rent is (unless of course you do pay it all). So if you live with three roommates who help pay the rent, don't enter $800 if you only pay out $200.
  

Warnings

• Watch out for sneaky creditors. They like to prey on desperate people looking for anyone who'll cut them a break. Make sure you don't default on the minimum payments at any point, otherwise you could see the end of your low interest period.
  

How to Build Good Credit

from wikiHow - The How to Manual That You Can Edit

The only way to establish good credit is to actually to start buying on credit. This is the only way to establish a credit history which reveals your ability to pay for things that you buy or use.

Steps

1. Apply for a credit card. Choose one that offers the lowest interest rate and if possible one that offers a cash back percentage on purchases you make.
   
2. Check your budget. Find out how much cash you have left over at the end of the month, for an added purchase expense.
   
3. Use the credit card instead of cash to make the purchase. Make sure that you do not charge more than you can actually afford to pay at the end of the month.
   
4. Pay each credit card bill in full as soon as you receive it, so you do not establish yourself as a 'late' payer.
   
   • Realize that this method might not work for you, and follow another way of establishing credit.
     
   
   
5. Open checking and savings accounts. Lenders see bank accounts as signs of financial stability and consistent savings behavior. Given this, evidence of continuous use of checking and savings accounts increases your chances that a bank will offer you a credit card.
   
6. Alternatively, contact your bank or credit union, open a charge account with them, and deposit a specific amount of money 'into' the account. This is called a pre-paid charge account.
   
7. Charge as you need, but watch the balance. Remember this method only allows you to charge up to the amount deposited, and will count down, each time you make a purchase with it.
   

Video

In the so-called "new economy," a good credit score is more important than ever. You won't be able to get a mortgage loan and buy a home without one. In this video, the creator of the Home Buying Institute will teach you how to raise your credit score fast, by focusing on the three most important factors.

Tips

• When you establish your credit card, ask that your date of payment coincide with a date when you know you will have the money to pay. They will work with you on this.
  
• Getting a credit card that has the same due date as your utilities, rent or mortgage will make it difficult for you to have the funds on hand to pay off your credit card.
  
• Check your statement for the date that the payment is due. If you want to buy something close to that date, wait until after you have made your payment. This way you will avoid an extra charge within the same billing period.
  
• Once you have begun establishing a credit history, apply for a small amount of installment credit. The best credit scores are obtained through the use of installment credit (auto loans, personal loans and mortgages) in addition to revolving credit (credit cards and lines of credit).
  

Warnings

• Only buy or use the credit card, to charge an amount that you know you can pay in full. Once you start overcharging, trouble begins. Only charge what you can pay so that you will be able pay everything you charged in that one month period.
  

How to Choose Your First Credit Card

from wikiHow - The How to Manual That You Can Edit

If you need a credit card, proceed very carefully...after all, as Mark Twain said "a banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain".

Steps

1. Look for a card that has good benefits. Good benefits may include low interest, promotional interest rates, no annual fee, no bank service charges, air travel bonus miles, credit points toward purchases, credit points toward long-distance phone calls, or credit points for gasoline.
   
2. If offered a promotional interest rate, find out the terms of payment and when the rate will expire. Most cards apply payments to lowest interest charges first, leaving your higher interest charges to collect interest until the entire amount is paid off.
   
3. Ask if there are fees and charges. There may be an annual fee, an application fee, an account service charge, an over-limit fee, a late-payment fee, a cash advance fee, and other miscellaneous fees. Compare these fees to other cards to see if they are trying to rip you off.
   
4. Check the interest rates. Some cards charge interest from the date of purchase. Some cards charge interest from the billing date. Pay all of your bills on time to avoid paying interest.
   
5. Find out if the card offers a standard monthly billing cycle. Some cards expect a payment every two weeks! Ask if there is a penalty for not using your card.
   
6. Apply. There are usually three ways to apply: through the mail, over the phone and on the internet.
   
7. Activate the card when you receive it. Follow the activation instructions included with the card, usually this can only be done from your home phone. They will try to sell you several services over the phone. Say no. Sign the back of the card before you use it.
   

Tips

• Spend your money wisely, and make your payments on time.
  
• Pay off your entire bill each month (billing cycle). Set a budget on how much you can pay off in one month.
  
• Use your card only within your budget. Do not purchase items that are too expensive, just because you have credit.
  
• If you find you cannot make your monthly payment, stop using the card immediately. Cut the card in half and never use the number again. Cancel all automatic payments that charge to that card.
  
• Banks that back credit cards will frequently ask questions on the application such as "What is your yearly income?" or "What is your current bank account balance?" These pieces of data are what are called "risk splitters." The banks use this information to decide what sort of credit line to assign you. Banks will commonly ask for proof of income as part of the approval process.
  
• If you pay off your card in full every month, the interest rate on the card does not matter, since you will not be paying interest.
  

Warnings

• Make sure that they do not charge any fee for the card, because if they do, they are ripping you off.
  
• If this truly is your first credit card, you may not receive as favorable of terms (especially in terms of interest rate) as those who have long-established credit histories. Students or those who have never used credit before may find it more difficult to be approved for their first card, although students do have an advantage in that many credit card companies have offers that especially target college students.
  

How to Cut Credit Card Debt

from wikiHow - The How to Manual That You Can Edit

Most Americans have too much credit card debt. We've all heard that before, right? Only now it's gotten a bit personal... right again? You personally have too much credit card debt and it's about to drive you crazy. Reduce your debt now by following these steps.

Steps

1. Keep in mind that your creditor is probably very willing to work with you. It's in his or her best interest to have you making some payment versus no payment. So here are a couple of points to help you deal with your credit card debt.
   
2. Contact your creditor and explain your situation. Ask for a lower interest rate or a repayment plan.
   
3. Stop using your cards. Cut them up, freeze them in a tub of water, whatever you need to do to get them out of your wallet or purse, do it!
   
4. Pay off the cards with the highest interest rate first and work from there. How do you do that? Call the companies and pin down exactly what rate you are actually paying on each card. This is called "Laddering". Alternately, you can use a "Reverse Laddering" approach, where you pay your bill with the lowest balance first, then the next lowest balance, and so on. This frees up more cash in hand to start chipping down the higher balance debts you have. This method is effective because instead of paying small chunks of money toward those high interest bills, you can throw large chunks of money at them, reducing the amount of time needed to pay them off. Also, your attitude will be better because you see the results of your progress faster, and therefore aren't discouraged as easily. You must be careful though, because sometimes the money you pay on the higher interest is more than the money you free up each month when paying off the small balances. Review your finances thoroughly, crunch the numbers, and see which method would be the most effective for your situation.
   
5. Keep your chin up and have a good attitude. Millions of folks just like you have begun to cut their credit card debt by following the common sense steps outlined above. You can do it too. Good luck.
   

Video

Tips

• You might not have thought of it because you're just naturally so polite, but it's a very good strategy to be courteous at all times when negotiating with your creditor. Polite, but firm. Come across as one who knows what you're asking for and expect to get it.
  
• If you're not sure what you're asking for in the first place you might consider a reputable credit counseling service. There are many honest organizations out there whose mission is to help you work things out with your creditors.
  
• Avoid the temptation to keep adding to the problem by running your debt up any higher. This is actually one of the hardest parts of cutting your credit card debt. It's like you're addicted to spending money you don't have. So go cold turkey and drop the habit.
  
• Do your banking online. This lets you pay off your bills right away and focus on other more important things in life.
  

Warnings

• Pay more than the minimum balance each month. The minimum is designed to keep you on the hook longer. The credit card companies are in this business to make a profit and want to have you paying them for years to come. Even a little extra each month makes a big difference in the long run and may cut years off your payments.
  
• Applying for another credit card to pay off the credit card debt on your other credit card will just increase your debt.
  

How to Get a Low Interest Rate Credit Card

from wikiHow - The How to Manual That You Can Edit

In general, a credit card interest rate qualifies as “low” if it’s below 15, with the lowest being under 10 percent. Credit card interest can add up quickly, so if you’re carrying a balance on your credit cards, lower interest means reduced fees over time and, ultimately, a faster trip out of debt. The worse your credit is, the harder it will be to get a low interest rate credit card. However, there are still a few steps you can follow to increase your chances of paying a lower interest rate.

Steps

Maintain Good Credit

1. Credit card companies will usually offer their best incentives to the customers they most want to attract -- those with good credit. Therefore, maintaining a good credit rating gives you the best chance to be offered a low interest rate credit card.
   

Compare Rates

1. Browse different credit cards and their rate information, which is available online through one of many credit card comparison websites.
   
2. Keep your credit as high as possible (and keep your odds of getting accepted as high as possible) by applying selectively for credit cards. Your credit is affected every time you apply for a credit card.
   
3. Read the fine print carefully before applying for and using a credit card.
   
   • Understand the difference between margin and APR. The APR or Annual Percentage Rate is your card’s interest rate. The margin, which you’ll find on variable interest rate credit cards, is the difference between the prime rate and your APR. So a 3.99% margin is not the same as a 3.99% interest rate; instead, it signifies the prime rate plus 3.99%.
     
   
   

Consider Secured Credit Cards

1. Apply for a secured credit card if you can’t qualify for a low interest unsecured credit card. Secured means that you’re “securing” the debt by making a cash deposit beforehand. That way the credit card company knows that some or all of the debt will be covered. This makes it easier for those with poor credit to have access to a relatively low interest rate.
   

Tips

• Watch out for introductory interest rates that appear to be low, but go up sharply after the introductory period has ended. Read the fine print carefully. Is the introductory rate for the life of balances charged or transferred, or only a limited time? If you’re looking at balance transfer possibilities, are there any fees associated with the transaction?
  




• Beware of variable rate interest cards. While variable interest rate credit cards may have a low interest rate at first, that rate is subject to change at any time with little or no prior notice. Even fixed rate cards may be subject to changes in interest rate, but your credit card company will notify you before this happens.
  
• The lower limit or rate floor on a variable interest credit card signifies the absolute lowest your interest rate can go. So if your lower limit is not very low, you won’t be able to enjoy the benefits of a low prime rate because your interest rate will never go lower than that lower limit or rate floor.