Posts tagged: applying_for_a_credit_card

How Do You Understand Credit Card Application Terminology?

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Applying a credit card is not easy to begin with, and the words they use that are difficult to understand are not helping any. The one thing you want most, when you are applying for a credit card, is to understand the details of the application and the terms and conditions of the credit card loan. But how could you possibly do that with all the seemingly foreign language they use in the advertisement alone, to say nothing of the actual details.

Knowing what you are reading on a credit card application is important. But sometimes, even talking on the phone with a representative from a credit card company, it can be difficult to understand and follow along. Here are a few words that may be useful to know, what they mean, and what they have to do with getting a credit card.

Collateral

Collateral is some sort of asset, or something that you own that is of value, that you are willing to secure a credit card loan with. It secures your loan so that if you do not pay your bills, whatever you put up for collateral will be taken by the credit card company. If you are applying for a secured credit card, you will be required to pledge something that you own that is worth a certain amount in case you fail to pay your bills, or if you take out bankruptcy.

Credit Scoring System

This refers to the complex equation and factors that are calculated into your credit score. Your credit score and your credit report will determine whether or not you will be approved for a credit card, and how much your interest will be.

Annual Percentage Rate

Usually this is written as APR. Annual Percentage Rate is the percentage of the principle you will be charged in interest per year. This amount compounds each month, so the APR should not be confused with the actual interest rate. They are two seperate calculations of interest.

Fixed Rate

A fixed interest rate is a rate that will not change unless you make late payments. A fixed interest rate basically stays the same if you pay your bills on time and do not incur other penalties on yourself. There are some fixed rates that only last for a certain period of time, but others last for the entire time that the credit card account is open and active.

Finance Charge

Basically, this is what they use to describe your overall interest. A finance charge is a charge or fee they require you to pay for borrowing money on credit. So when you see “finance charge” written on an application, that is the total amount estimated that you will pay in interest.

There are several things you may not understand when you are trying to apply for a credit card. Along with the hassle of applying, you should not have to worry about the terminology. Knowing what you’re getting into is essential, and can save you loads of money in the future.

What is the Fair Credit Report Act?

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The Fair Credit Report Act is a law that protects and prohibits the distribution and use of your credit information. It protects you from the possibility of your credit history and other credit information getting into the wrong hands. It also prevents the wrong people from changing or manipulating your credit information.

There are several factors that allow your credit information to stay safe, but there are a few people who have access to it when it is necessary. Most of the time it is used to evaluate whether or not you are worthy of getting a loan or a contract similar to that. Here are a few examples:

1. Companies where you have credit can access your credit report so that they can monitor your credit. This way, they know whether or not you are capable of paying back what you owe on credit and how well you can make your payments on time. However, no one is allowed to give out your credit information in these situations except you.

2. Insurance companies are allowed to check your credit report for generally the same purpose. They need to know if you will be able to pay your insurance bills on time. By checking your credit report they can see your payment history and evaluate whether or not you can make the correct payments punctually.

3. Anyone who is allowing you to get credit from them. Whether you get credit by applying for a credit card or for a loan, those who will be your lenders are allowed access to your credit information. The very factor of your credit score and the details on your credit report determine whether or not you get credit in the first place. This allows credit lenders to find out how faithfully you will pay them back.

4. Your employer has the opportunity to look at your credit information, but in this case, it is only your consent that can grant them access to it. The previously mentioned cases may check your credit score whether you want them to or not, but possible employers, when considering you for a position, must have your permission before they see any of your credit information.

The Fair Credit Report Act also protects you from identity theft. Your credit information entails a lot of information about you, including important details like your social security number, date of birth, phone number, etc. Because it protects these details so intensely from getting into the wrong hands, it protects you from other dangers like identity theft.

The Fair Credit Report Act also gives you the right to take action on part of your credit information and request information about it. If you have a problem with your credit report, you have the right to dispute the mistake that you feel was made. If you want to know what your credit score is, you have the opportunity to request a free credit report once a year.