Consumer Law

Credit Card Lender Standards

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

Prime Versus Subprime Markets

The credit industry divides potential customers into two categories:

  • Prime market customers. These are people who have good credit histories 
  • Subprime market customers. These are people with iffy or no credit history or who 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. It requires you 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 or not to grant you credit.

Lender Questions

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 or not you pay child support or alimony
  • Your immigration status
  • Any previous names under which you received credit

Creditors can't ask whether or not 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.

Equal Credit Opportunity

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. Be on the lookout for tricks some credit card companies use to lure credit-risky consumers into choosing their card. These include: 

  • Teaser interest rates that only stay low for a short period of time, then jump to extremely high rates
  • A new annual fee, when you were initially told there was no such 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
  • New 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.

Questions for Your Attorney 

  • What should I do if I think a credit card company illegally discriminated against me in rejecting my card application?
  • What should I do to prevent my credit history from being damaged by my divorce?
  • How can I rebuild a good credit record after bankruptcy?
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