It’s so easy to get into debt
Posted on November 14, 2007
Filed Under Advice, Credit Rating, Secured Credit Cards | Leave a Comment
Credit is an important instrument for life and creates a “financial resume,” making it essential for consumers to establish their credit history.Amie Darway, program manager for the Consumer Credit Counseling Service of North Central West Virginia, headquartered in Clarksburg, said the first step a person can take to start establishing credit is to set up checking and savings accounts. These accounts will create a history with the financial institution.An individual can also get a secured card, which involves making a deposit that sets the limit for the card. If a person is unable to make payments on his or her secured card, the money is there to cover it.
“If you’ve never had credit before, you need to make sure you can handle credit,” Darway said. “If you haven’t had a checking and savings account, you probably shouldn’t go out and get a credit card.”
She recommended that people who have no credit experience arrange a budget session with a credit counseling agency to get some advice. A meeting like this can help someone understand how to properly use credit. It’s important for persons to identify why they want the credit and how much credit they can afford, Darway said.
The Consumer Credit Counseling Service of North Central West Virginia offers educational programs, such as a 12-chapter course called “Credit when Credit is Due.”
Darway said older generations sometimes have trouble getting credit cards because they’ve never had credit or haven’t had to make house payments or other payments in a while. Persons who are relying on credit cards to pay living expenses should talk to a counselor, she said.
If an individual applies for a credit card and is rejected, he or she should find out the reason why through a free credit report, Darway said.
Under federal law, everyone is entitled to get one free credit report per year from each of the three primary national credit reporting agencies — Experian, Equifax and TransUnion. Persons can access all three of their credit reports through one source, annualcreditreport.com, or they can visit each agency’s individual Web site.
Getting turned down for a credit card could be the result of no credit, insufficient income to handle the credit, or errors on the credit file, Darway said.
She advised that people interested in obtaining a credit card visit their local bank where they have an account or go to a local credit union. Consumers should watch out for credit card offers they receive in the mail and read the find print.
“If you have no credit experience, you may want someone else to look at the offer to make sure it’s as good as it sounds,” Darway said.
Upon being approved for a credit card, a person should keep his or her balance at 30 percent of the limit or lower, and pay more than the minimum payment. Also, people should try not to charge something that they can’t pay off in 90 days, she said.
“It’s so easy to get into debt and so difficult to get out,” she said.
Darway said department store credit cards may be useful for people if they shop at a particular store frequently and can receive benefits. But she warned persons to be careful because these cards usually carry a higher APR than a Master Card or Visa.
Some vendors — such as local department stores or gas stations — will more easily award credit cards than major credit card companies, said Charli Fulton, senior assistant attorney general of West Virginia.
“What you need is to build a credit score,” Fulton said. “Building a good credit score is very important today. Many employers check credit reports before they hire. Landlords can check credit reports before they rent a place, and many kinds of insurance have a component that takes into account credit.”
By Jessica Legge
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