What factors determine whether you will receive credit?

Creditors consider several factors in determining whether you receive credit. These factors include your income and ability to repay debt, your creditworthiness and credit history, your job stability, and your assets. The higher your income level, the more likely that someone will take a chance and extend you credit. If you have a history of missing payments or making late payments, that reflects poorly on your credit history and makes you less a creditworthy individual. Likewise, if you have worked at the same job for a period of time, that stability could be factored into the credit loan decision. Also, if you have assets (a car, a house and other property), those could be considered in the credit process.

How can you build good credit?

A good way to build a good credit history is to open a bank account and use it responsibly. Another good way is to open up some other type of account—perhaps a single credit card—and make payments in a timely fashion and keep the balance much lower than the actual credit limit. Maintaining steady employment and owning a home can also help increase your credit score and make you more creditworthy.

Where do you go to select the right credit card?

Good question; this is an important decision. Remember that a federal law known as the Truth in Lending Act requires credit card companies to disclose the basis terms of the card to you in their solicitations. There are several places to go to find information about credit cards. Some of the most common include: Cardweb.com, Bankrate.com and CreditcardSearchEngine.com.

What is a variable rate?

Variable rate is tied to the annual percentage rate described above. Many credit card companies will offer a variable rate as opposed to a pure fixed rate. They often will say that the APR on the card will vary with the corresponding prime rate in the market. Also, credit card companies may something like three different percentages for an APR (9.99%, 11.99%, or 14.99% depending on your credit).

Do credit cards always have annual fees?

Some credit cards do and some credit cards do not. This is one factor you may want to weigh in determining whether or not you want to apply for and/or accept a particular card.

What can you do if there is an error on your credit card bill?

Fortunately, there is a federal law known as the Fair Credit Billing Act which provides an avenue for relief for those who are charged wrongly, incorrectly, or unfairly. Under the Fair Credit Billing Act, you must notify the credit of the error promptly—within 60 days of first receiving notice. You may wish to contact the creditor in writing and explain the error so as to ensure the triggering of the protections of this law.

Your letter (which you should send by certified mail) should contain your name and the account number on which the error took place, your belief as to the specific billing error and the amount of the error, and the reasons why this is in error (never charged, wrong amount charged, double billing, etc.)

The good news is that a creditor cannot harm or threaten to harm your credit rating during the pendency of the particular dispute.

What is a credit report?

A credit report is exactly as the name suggests—a report on an individual's creditworthiness. Credit reports have your identification, employment record, payment history,

Credit bills can easily sneak up on consumers, and with high interest rates and fees, many Americans can quickly find themselves buried in debt in a matter of months (iStock).

Credit bills can easily sneak up on consumers, and with high interest rates and fees, many Americans can quickly find themselves buried in debt in a matter of months (iStock).

inquiries from other creditors, and certain public information, such as bankruptcies and tax liens. Consumers have the right to access their credit reports under the Fair Credit Reporting Act. The three major companies who track credit reports—Trans Union, Experian, and Equifax—are required under federal law to give consumers a free copy of their credit report once every 12 months upon request. Consumers can also pay a small fee to obtain a copy at other times. Federal law sets the maximum fee at $11.

Also, the Fair Credit Reporting Act provides that if a fraud alert is placed in a consumer's credit report, that consumer can have two free credit reports within the next 12 months.

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