How To Get a Credit Card: Guerilla Tactics For The Credit Impaired
Have you ever tried to rent a car or a hotel room without a credit card? How about making purchases on the Internet? Whether you like using credit cards or not, they are an important part of everyday life, and used responsibly, are a great financial tool you can use to build a business or cover day-to-day expenses.
The credit industry has a huge impact on the American economy, and as a consumer, you are an important link in this sector. Recent statistics estimate consumers carry nearly $2 trillion in consumer debt, with approximately $8,500 dollars serviced by each American citizen, and over $50 billion dollars in annual finance charges paid (which does not include home mortgages). With all of this credit, 22% of us do not qualify for credit cards, and approximately 1.5 million cardholders declare bankruptcy annually. While the numbers appear frightening, credit is a powerful tool, which when used properly, enables consumers to enjoy online transactions, travel, and even investing.
What this means to you is that overall the image of credit card debt is not really as bad as you may be led to believe by the media. Credit card companies are not on the verge of failure and continue to welcome new members at record rates. For people without credit cards, or poor credit ratings, the trick becomes one of convincing a credit card company that you are a worthy credit risk.
Approximately 90% of all creditors in the U.S. use a standard scoring system to automate the approval process. This number is known as your FICO. FICO stands for Fair Isaac Corporation, its original creator. Here are some interesting facts about FICO scores that may help put your current credit status in perspective:
Median FICO score: 723
FICO scores range from a high risk of 300, to a low risk of 850. The higher your score, the better.
FICO scores are determined using a formula that looks at income, money owed, payment history, and types of credit used.
To arrive at this number they use information about your credit history, home ownership, income, and seemingly insignificant things like having a telephone, or an established bank account. Basically, creditors are looking for stability. They want to issue cards to people with jobs and obligations.
The Application Rating Process
The first thing you should know is that creditors typically use the FICO to analyze your creditworthiness, but how FICO scores are interpreted may vary. That in itself can work to your advantage. You could be rejected by one company's scoring system and approved by another. One creditor's system may view your current income or cause for past payment delinquencies differently than another, while others will only look at the FICO and not go beyond this superficial judgment of your creditworthiness. Underlining the importance of FICO scores, recent sub-prime lending laws promise to further restrict access to credit to those with poor FICO scores.
Banks and other lending institutions make money by loaning money to you, with interest and fees. Keep in mind that their motive is to make a profit; therefore, it is a never ending struggle for them to find credit worthy clients to issue their to. The bottom line is, they want your business. Your job is to convince them you are worth being added to their client list, and the purpose of this report is to help you become more appealing to their marketing department. Since your credit report is given a numerical score, based on a formula created by the Fair Isaacs Corporation, also known as your FICO, you need to know what you can do to increase that number. The average American FICO score is 675, which is not necessarily that high.
Your residential status is one of the primary measurements of your FICO. Banks love stability, so they primarily market to homeowners, and people who have lived in the same location for several years. A transient lifestyle (moving every year or so) is not conducive to good credit. Nor is renting an apartment. If you have a history of making late payments, or defaulting on prior loans, owning a home, or at least being able to claim homeownership, is virtually a requirement.
That doesn't mean you should lie on your application. It simply means you should be aware that being compatible with certain stereotypes that will work in your favor. Remember, a creditor can still verify the information you list in an application. Still, many people will twist the truth to put themselves in a favorable position.
Have you ever tried to rent a car or a hotel room without a credit card? How about making purchases on the Internet? Whether you like using credit cards or not, they are an important part of everyday life, and used responsibly, are a great financial tool you can use to build a business or cover day-to-day expenses.
The credit industry has a huge impact on the American economy, and as a consumer, you are an important link in this sector. Recent statistics estimate consumers carry nearly $2 trillion in consumer debt, with approximately $8,500 dollars serviced by each American citizen, and over $50 billion dollars in annual finance charges paid (which does not include home mortgages). With all of this credit, 22% of us do not qualify for credit cards, and approximately 1.5 million cardholders declare bankruptcy annually. While the numbers appear frightening, credit is a powerful tool, which when used properly, enables consumers to enjoy online transactions, travel, and even investing.
What this means to you is that overall the image of credit card debt is not really as bad as you may be led to believe by the media. Credit card companies are not on the verge of failure and continue to welcome new members at record rates. For people without credit cards, or poor credit ratings, the trick becomes one of convincing a credit card company that you are a worthy credit risk.
Approximately 90% of all creditors in the U.S. use a standard scoring system to automate the approval process. This number is known as your FICO. FICO stands for Fair Isaac Corporation, its original creator. Here are some interesting facts about FICO scores that may help put your current credit status in perspective:
Median FICO score: 723
FICO scores range from a high risk of 300, to a low risk of 850. The higher your score, the better.
FICO scores are determined using a formula that looks at income, money owed, payment history, and types of credit used.
To arrive at this number they use information about your credit history, home ownership, income, and seemingly insignificant things like having a telephone, or an established bank account. Basically, creditors are looking for stability. They want to issue cards to people with jobs and obligations.
The Application Rating Process
The first thing you should know is that creditors typically use the FICO to analyze your creditworthiness, but how FICO scores are interpreted may vary. That in itself can work to your advantage. You could be rejected by one company's scoring system and approved by another. One creditor's system may view your current income or cause for past payment delinquencies differently than another, while others will only look at the FICO and not go beyond this superficial judgment of your creditworthiness. Underlining the importance of FICO scores, recent sub-prime lending laws promise to further restrict access to credit to those with poor FICO scores.
Banks and other lending institutions make money by loaning money to you, with interest and fees. Keep in mind that their motive is to make a profit; therefore, it is a never ending struggle for them to find credit worthy clients to issue their to. The bottom line is, they want your business. Your job is to convince them you are worth being added to their client list, and the purpose of this report is to help you become more appealing to their marketing department. Since your credit report is given a numerical score, based on a formula created by the Fair Isaacs Corporation, also known as your FICO, you need to know what you can do to increase that number. The average American FICO score is 675, which is not necessarily that high.
Your residential status is one of the primary measurements of your FICO. Banks love stability, so they primarily market to homeowners, and people who have lived in the same location for several years. A transient lifestyle (moving every year or so) is not conducive to good credit. Nor is renting an apartment. If you have a history of making late payments, or defaulting on prior loans, owning a home, or at least being able to claim homeownership, is virtually a requirement.
That doesn't mean you should lie on your application. It simply means you should be aware that being compatible with certain stereotypes that will work in your favor. Remember, a creditor can still verify the information you list in an application. Still, many people will twist the truth to put themselves in a favorable position.
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