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.