by Katerina Nikolas

Created on: January 10, 2011   Last Updated: January 14, 2011

The optimum way of ensuring you can obtain a credit card in a tight credit market is to have excellent credit. Risk averse lenders still want new business: they just want to avoid the consumers that represent a high risk of default. Those with excellent credit are less likely to need credit and will thus find plenty of available offers, often packaged in sweet deals. Credit card issuers are looking for customers that will handle their credit obligations responsibly, and are attempting to promote customer loyalty in order to sell other products.

People who are new to credit and have not had time to establish a credit history may find it difficult to obtain a credit card, as lenders have no track record to make an assessment from. It is possible to begin to establish a credit history by obtaining an easy to acquire store card.  Using a store card  to make purchases which should be paid off in full by the due date, to avoid the exorbitant interest rates applied, can help to establish history.

Secured credit cards are another option, but look for one with low fees. The interest rates should be immaterial if you plan to pay the monthly balance in full, which is good practice for when you can transition to unsecured credit cards. A security deposit equal to the credit line will be required, which acts as insurance against default.

Young people and students can apply for credit cards with a co-signer or a proven income. Another option is to become a named card holder on someone else’s account, but this is not always wise as if the primary card holder makes a financial blunder this will then be reflected on your own credit history.

Those who only have average credit will probably find it difficult to obtain a good credit card. The best option is to work to improve credit by paying down any existing balances to less than 30% of available credit limits. Any late payments should be brought up to date and current obligations paid in a timely fashion. Credit reports are available to consumers free of charge once per annum from each of the three main credit bureaus, and these should be checked to ensure there are no recorded inaccuracies which could be holding credit scores down.

The best advice for those with bad credit is to simply wait to apply for a credit card until credit history is improved. Unless a secured credit card is obtained those with bad credit are most likely to only be serviced by the sub prime industry, which is best avoided. Even though sub prime lenders are now restricted from levying fees which represent more than 25% of the credit limit extended, they will still apply very high interest rates. First Premier for example has a card which levies an APR of 79.9% plus fees. It is not wise to apply for new credit cards when the choice of provider signals desperation.

Although many people favor the use of credit cards they are not always available to applicants in a tight credit market. It may represent a good time to manage without credit until personal credit is improved, but this can be a catch 22 situation for those who need to use credit to establish good credit. If credit cards are not readily available then the best option until credit is improved is to opt for a secured card.

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