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Credit cards 101
January 3, 2010 5:28 PM   Subscribe

How and where to apply for a credit card?

I'm a credit-cardless college student. Currently I have a joint debit/checking account with my mom that I'm the sole user of, and nothing else. I am very good with my money, have a good amount of savings and have no loans and also no previous credit-related infractions (at least not that I know about).

Over the summer I applied online for the amazon.com credit card, was rejected after a month or so, poured out my heart into a reconsideration letter, sent it in, and have since (unsurprisingly) heard nothing. I want to try applying for another credit card but I have a million zillion questions and confusions about this.

Is it too soon for me to apply for another card? I last applied in August.

My bank doesn't have a credit card program (that was going to be my next step). How can I find legitimate student credit card programs or ones that would be likely to ... accept me? There isn't really a particular store I like, but would a store credit card program be a good idea?

I want to apply for a credit card in person, right? Could that have been a reason why I was rejected for the Amazon card?

Should I check my credit score even though I don't think I have any credit? (how do I do that?)

And also, assuming I end up applying for another card soon: would it be a better idea to list my school address (where I get my mail and will be living until summer) or my home address (where my parents get the mail and they will be living there indefinitely) on a credit card application?

Thanks so so much!
posted by sarahj to Work & Money (14 answers total) 8 users marked this as a favorite
 
A department store credit card, paid off regularly (interest rates are rapacious) will establish a pattern for a credit history.

A credit union is a much better choice for a card than a bank.
posted by megatherium at 5:44 PM on January 3, 2010


Before I say anything else, you want to go to bankrate.com and use their credit card comparison tool. You can search for the best student card there.

When you apply for a credit card, they'll likely do a "soft hit" on your credit history. This is there way of seeing what credit you have and how responsible you have been with it. Some companies do a "hard hit." A hard hit will appear on your credit history, and will slightly lower your score for a small amount of time. So you should be fine applying for a new one.

The most important thing to think about is what you plan to use the card for. If this is for emergencies* where you need to spend more money in a month then you make in that month, you want the lowest interest rate possible. If this is for a convenient way to pay for things, you want the best rewards you can get. In my opinion, it's really hard to beat cash back, but some people prefer things like airline miles. Bankrate.com is an excellent site for comparing the features of cards.

(A quick note on paying for things with a credit card instead of a debit card: credit cards give you better fraud protection. Using a credit card and never using a debit card at a merchant is a good way of firewalling your bank account too, by which I mean it's a good way of reducing the number of people who have your account number on file, reducing the number of opportunities for fraud to occur to your bank account/debit card.)

You don't have to apply for a credit card in person. Really, you can only do that with a local bank or store.

You can go to Annual Credit Report to check your credit. There are 3 credit reporting agencies. By law, you get to look at the report they have on you once a year for free (3 companies, 3 free reports, and you don't have to get all 3 reports at once). They will not tell you your credit score, however. If you have student loans, that'll show up on your credit report.

You want to list your legal residence on the application. That's where you vote.

A quick word on cards, it's really easy for people to get out of hand with them. That's why I suggest you think about what you want to use the card for first, and then stick to that plan.

I suggest you also check out MeFi's own JD's Get Rich Slowly to learn about finances in general, and tricks for responsible card use.

*You should setup an emergency fund as soon as you get an income. Your goal should be 3-6 months of expenses. It is always better to save ahead of time than it is to pay back what you have borrowed.
posted by ifandonlyif at 5:55 PM on January 3, 2010 [1 favorite]


After going to bankrate, I see that they have a lot of Discover cards in their student section. I personally think you want a Visa or MasterCard for your first card, just because of their greater acceptance.

There's also a thing called a secure credit card. Basically, you pay the bank a security ahead of time, like $200, and you use the card normally up to that amount. It's a way of building your credit, but as soon as you get good credit you want an unsecured credit card.
posted by ifandonlyif at 6:02 PM on January 3, 2010


You probably have to apply for a college student credit card. Most of the big companies have them: Discover, Chase, Citibank, Wells Fargo. The address you use doesn't matter, they will ask you for some kind of proof that you are enrolled. I've never heard of needing to apply in-person - maybe you can pick up and drop off the form at a branch, but they will just mail it to a computer sitting in the midwest that makes the decision. I'm sure they'd much rather you do it online.

I don't think it's too soon, and I wouldn't bother pulling your own report. Just apply for a college student card -- if they reject you for that, then you might want to look at your credit history and see if there is something there that shouldn't be.
posted by AlsoMike at 6:10 PM on January 3, 2010


As already mentioned, student credit cards are the place to start.

When you're rejected for a credit card, you have the right to find out the reason(s) why and also to obtain a free credit report within 60 days (you can also get one free every year) see this FTC site for info and be aware of scam sites out there. In your case you may simply not have had enough income to qualify, and banks are tightening up, but it's worth finding out so you know what to do next time. You may want to start an account at a bank or credit union where you could get a credit card after some time.

FWIW, to add to ifandonlyif's advice, I started with Discover back in college (*cough* 20 years ago *cough*), used it wherever I could and paid it off every month, and it's accepted at many more places now than back then. I got a MC a couple years later to round it out.
posted by girlhacker at 6:16 PM on January 3, 2010


Oh, the irony. When I was a student credit cards hounded us. Discover kinda tricked me into an account. But those were different times, when investors would buy up repackaged credit card debt. Right now, most credit card companies are contracting their new business; the money they lend you comes from deposits and loans they take out in the market.

First thing you should do is get your free credit reports to see if there's anything unusual. That report also gives you an idea of what agencies see. Then consider spending a bit of money to run a full FICO score report; last I thought I'd have too short of a credit history for good auto loans but that card I received but never used appears to have helped me establish an 800-ish score. It sounds like you've been very conservative with credit, which can actually hurt your score. Three important things determine your credit score, in proportions that are kept secret:
1. Your history of timely payment.
2. The percentage of available credit you're using right now.
3. The length of credit history.

As a student, you're probably not going to score high in any of these. With no loans, you have no payment history on record, and therefore no length of credit history. And with no loans or a credit card, you're probably going to score low on the available credit item as well. I understand such people usually have an X score, rather than simply a low one. So if your free credit agency report doesn't turn anything up there's little reason to bother paying for a FICO.

Secondly, after you've gathered the apparent facts and fixed any errors, I suggest checking out online offers from the major companies. They don't have fancy teasers like retailer discounts off a single purchase, but they often have reward systems retailers participate in. Whether you'll qualify for these depends on that FICO score and the issuer's ability to sell your debt.

If you have your credit score on hand, you can also go shopping to banks and credit unions in your area. They'll have different lending standards, so maybe ask whether your FICO is high enough to bother applying with to avoid a hit on FICO from recent credit queries.

Frankly, credit card debt is the hardest to get for a reason. It's usually unsecured, meaning you offer no collateral. In contrast, a car loan is secured by the car; if you default they retain the car. As a last resort you may need to pursue a secured credit line, which acts similar to a debit card but reports to the agencies to establish a line of credit. Secured credit cards use a cash payment as collateral.

As for your address, I used my parent's address as permanent on that card. It's easy to change the address, and shouldn't have a bearing on your account. What really matters is how you intend to use the card. I don't intend to carry a balance so I look for rewards cards as a collective consumer bargaining tool. If you want to carry a balance, shop for low rates. As ifandonlyif mentioned, Discover isn't accepted everywhere, because their high reward rate is passed onto retailers. I carry backup for this case, but it may be more hassle than its worth for you.
posted by pwnguin at 7:16 PM on January 3, 2010


Did you look here yet...
posted by bkeene12 at 8:01 PM on January 3, 2010


I'll tell you what worked for me, with the disclaimer that I don't necessarily claim that this is the best course for you to take.

I only lasted half a semester in college before dropping out, so for a large portion of my post-highschool adult life, I didn't have an established credit history, because I couldn't even apply for a student credit card. "Store cards" were also an unsuccessful route, because nearly all of them rejected my applications due to insufficient credit history and low-income (I was a starving freelancer).

I don't remember how I first learned about Secured credit-cards, but for some reason, I found myself at the virtual door of CapitalOne, who accepted my application for a secured, $200 limit Visa card. Within 6-8 months of dutiful usage and paying off the balance every month, CapitalOne raised my limit to $500. Within a year, they unsecured the card, and made me an offer for a Platinum Visa with a limit of $1500, which I accepted.

About a year later, I applied online for a USAA Mastercard, and they accepted the application, albeit with a fairly piddly, sub $2000 credit limit. After diligent use of this card for 6 months, I clicked on the "Luv button" (the lingo used by CreditBoards forum users to describe the link used to request a creditlimit increase) on the USAA website, and was instantly granted a 1000% (!) credit limit increase.

It wasn't too long before I started getting "pre-approved" offers from every company on the planet, and within 3 years, my FICO score increased nearly 300 points.

Now my biggest caveat to this story is: CAPITAL ONE SUCKS. I won't waste more space here elaborating on the reasons for this, but suffice it to say, the only thing CrapitalOne is good for is as an easy way to establish/re-establish your credit. They are absolutely useless for anything else (it's been 10 years now, and I have never received a credit-limit increase from them past that initial $500 CLI)

Don't blow your "Inquiries" by blindly applying for credit without being certain that you will be accepted. The only reason why I recommend CapOne is that they're one of the few "reputable" (snicker) companies that will grant you a secured creditcard just for having a pulse and a Social Security number. A few years ago (things may have changed since then), some companies--such as Bank of America--would only offer a secured card to you if your unsecured application was not accepted, which may result in a double hard inquiry on your credit-report, should you decide to accept the secured offer.

If you're starting to build your credit from scratch, spend a LOT of time reading the CreditBoards.com forum. I attribute much of my self-extrication from a previously bad/non-existent credit history to the information I learned from obsessively reading that forum.

Good Luck.
posted by melorama at 8:12 PM on January 3, 2010


Without a credit history a student credit card is all you can get. But don't worry! There are sure to be tables with credit card salespeople set up at your college for the beginning of the quarter/semester. My only real tip is to pick a credit card from the same bank you have an account with. That makes it easier to pay the bill online, right from your online banking program.

Basically you are stuck with a crappy interest rate and a low limit, but that is fine because you will be paying the card off in full every month. Right?

After a few years, you will be able to qualify for better cards.
posted by twblalock at 9:07 PM on January 3, 2010


As a mostly credit-less student, I'm very happy with my Citibank credit card. I also have my checking and savings accounts with them, and it's quite convenient for me.

Try talking to the local branch of your bank. I'm sure they would be more than willing to help.
posted by chicago2penn at 12:00 AM on January 4, 2010


twblalock: "Without a credit history a student credit card is all you can get. But don't worry! There are sure to be tables with credit card salespeople set up at your college for the beginning of the quarter/semester"

Actually, I'm pretty sure that's not gonna happen anymore. Recent law requires your typical freshman to have a parent co-sign or demonstrate proof of income. Sane ideas for an insane industry, I know. Since most students are both under 21 and unemployed, a conspicuous absence of card hawks seems likely.
posted by pwnguin at 12:06 AM on January 4, 2010


(Disclaimer: I work at credit.com, but am also a longstanding MeFi member, not a shill!)


The CARD Act changes referenced above go into effect on February 22, 2010. It will be much more challenging to get a card at that point if you are under 21. (More info on the CARD Act here.)

As mentioned above, Student Cards are your best bet for being approved without a credit history. We run several cards from all major issuers, but generally recommend the Discover cards when we're asked specifically. They are accepted pretty widely, and if you're really just using the card to build credit, which is a good idea, you might avoid temptation by planning specifically where and when you'd want to use the card, and how you'll pay it off.

The advice about secured cards, above, is also good, but you want to be absolutely sure that you choose a card that reports to all of the credit bureaus, so that you're actually building a credit history with that investment.
posted by judith at 12:34 AM on January 4, 2010


I want to apply for a credit card in person, right?

I've never applied for a credit card in person (except for department store cards), and in most cases I'm not even sure that's practical/possible. Most cards are applied for by mail or over the internet. Certainly Amazon.com didn't expect you to drive to their office to get a card.

The main reason your application for a credit card was denied was most likely that you have no credit history. You need to establish a record of paying off cards/loans/etc before the "good" cards will consider you. I know, it's kind of a catch 22.

To establish credit, your local bank/credit union is probably your best bet for a credit card. You said your bank doesn't offer a card, but perhaps you could open an account with a different bank? If not, a local department store or other store card (JCPenny, Kohls, Target, whatever) would be another low-hanging-fruit choice.

After you get one of these (possibly less desirable) cards, use it, keep it paid off, and establish a good track record over a period of time (I don't know what the magic number is, but I'm guessing 6 months - 1 year), then you'll be much more likely to be accepted when applying for an Amazon.com card or other more desirable offer. Remember to keep it paid off though! Interest rates can really hurt over the long term.

My first experience with credit was getting a used car loan with my grandfather as a co-signer. After that loan was paid off, I found it much easier to get credit elsewhere.

YMMV.
posted by Vorteks at 7:47 AM on February 2, 2010


assuming I end up applying for another card soon: would it be a better idea to list my school address (where I get my mail and will be living until summer) or my home address (where my parents get the mail and they will be living there indefinitely) on a credit card application?

I'm not sure what, if any, effect your choice of address would have on your application. But since your bills, terms of service updates, and even the card itself would be sent to the address you provide, I would be inclined to say that you should put whatever address would get your mail to you faster.
posted by Vorteks at 7:51 AM on February 2, 2010


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