Credit Card Lender Standards

Do you want the convenience of a credit card, but suffer from financial woes that make getting a credit card difficult? The more you can learn about the standards credit card companies use to decide who gets a credit card, the better.

In recent years, credit card issuers have lowered their standards dramatically, to the point where the credit card companies have been accused of preying on those who are especially vulnerable, such as people who have recently declared bankruptcy and college students who may not be financially savvy about budgeting.

Prime Versus Subprime Markets

The credit industry divides potential customers into two categories:

• "Prime" market customers who have the credit histories to get credit easily
• "Subprime" market customers, who have iffy or no credit history, or have recently finished the bankruptcy process

If you're in the subprime category, you may need to work harder at finding a credit card that doesn't charge high interest rates.

Secured Versus Non-Secured Cards

One way to start building a good credit history is to apply for a "secured" credit card. This type of credit card looks just like a regular card, but you're required to deposit a certain amount of money into a savings account to "secure" your payment of the credit card bills. The amount you can charge on the card is usually the same as the amount you have on deposit in the savings account.

Applying For A Credit Card

Under the Equal Credit Opportunity Act ("ECOA"), credit card companies can't discriminate against you on the basis of:

• Sex
• Race
• Marital status
• Religion
• National origin
• Age
• Receiving public assistance

Creditors may ask for this information (except religion) in certain situations, but may not use it to discriminate when deciding whether to grant you credit.

Creditors can't ask whether you receive child support or alimony, unless you'll be relying on that income to make payments on your credit card.

Creditors also can't refuse to consider income as legitimate just because it comes from pensions, annuities, retirement benefits or part-time work.

Creditors are allowed to ask you questions about:

• Your number of dependents
• Marital status and your spouse's income if you're applying for a joint account, or you live in a community property state
• Whether you pay child support or alimony
• Your immigration status
• Any previous names under which you received credit

The ECOA protects consumers who deal with companies that regularly extend credit, including:

• Banks
• Small loan and finance companies
• Retail and department stores
• Credit card companies
• Credit unions

Everyone who participates in the decision to grant credit, including real estate brokers who arrange financing, must follow this law. Businesses applying for credit are also protected by this law.

Under ECOA, you have a legal right to know why you were denied credit.

Watch Out For Scams

Don't be so desperate to get a credit card that you ignore the fine print in the credit card contract.

And be on the lookout for these tricks some credit card companies use to lure credit-risky consumers into choosing their card, such as:

• "Teaser" interest rates that only stay low for a short period of time, then jump to extremely high rates
• A suddenly-appearing annual fee, when you were initially told there was no annual fee
• The "sliding credit line," where you're lured into using a cash advance check or skipping a monthly payment, and are then charged an extra fee because your credit limit is lowered
• Suddenly-appearing "fees" that aren't obvious and that you didn't bargain for

Alternatives To Credit Cards

If you can't find a credit card at a reasonable interest rate, you may want to rely on a bank debit card, which takes money directly out of your checking account. A debit card can be used to make purchases at a store, or over the phone or online, but you can only spend as much as you actually have in your checking account.

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