Boat loan for low score credit

STARTING OUT | Don't have a CREDIT CARD yet? Here's how to get one--fast.

BARBARA Frailey lives in an apartment in Brooklyn and is a full-time teacher. She pays her bills on time each month, and her only outstanding debt is a small amount on a student loan. Until recently, Frailey, 27, didn't even have a credit card--although not by choice. She once responded to a card offer through the mail but was turned down--ironically, because she had no history of repaying debt. "I was so discouraged that I didn't bother trying for a while," says Frailey. When she received a mail solicitation recently from Capital One Visa, she applied and got her first card--with a $200 credit line.

Credit card issuers can't seem to deal plastic fast enough to college students with no credit history and no income. It's estimated that more than two-thirds of college students have credit cards because banks and other issuers are willing to gamble that parents will bail out their kids if" they get into trouble. But if you're among the one-third of students who resist the pressure to get a card while in school, once you graduate you may find that you're considered as risky a credit prospect as Bonnie or Clyde.

"The best way to get credit is to be in debt," says Todd Meagher, president of Credit.com, a consumer-education Web site, because card issuers can gauge how reliable you are when it comes to repaying. Credit card and mortgage payments are regularly reported to the three credit bureaus (Equifax, 888-532-0179; Trans Union, 800-888-4213; and Experian, 888-397-3742), but most consumer payments--including rent, insurance and even student loans--are not, unless there's a problem. "You could pay your rent and utilities for five years and be a good customer, and you won't get any credit for it," says Meagher. "But miss a payment once and--bam--it's on your credit report."

That doesn't mean you've missed the boat if you didn't get a credit card in college. Competition is so fierce among card issuers that you may be able to establish a satisfactory history in as little as six months--rather than the year or more it used to take. If you play your cards right, you might even be able to get credit immediately.

Winning strategies. Start by checking copies of your credit report. If you've been turned down for credit within the past 60 days, the credit bureaus will send you a copy of your report free; otherwise, you'll pay up to $8.50 for each report. Correct any errors and clear up any disputes before you apply for a card.

Apply first at the bank or credit union where you have a checking or savings account. As long as you're employed full-time and haven't bounced any checks, your bank will probably be willing to issue you a card with a low credit limit--say, $200--and gradually ratchet up that limit if you pay your bills on time. The longer you've lived at your current address or worked for the same employer, the safer a risk you are.

If your bank isn't willing to issue you a card right away, you can build a credit history over several months with a department-store or gasoline card (both of which are easier to get) or even with a small bank loan, as long as your payments are reported to the credit bureaus. Bank of America and other major banks often have programs to help you establish good credit, for instance, by making you a loan that you repay before getting the money. After repaying a $500 loan, for example, you'll have $500 plus a good payment record--and the rest will be credit history.

First-time cardholders with limited or no credit history rarely qualify for low interest rates. But you should take the card anyway, advises Meagher. "You can always renegotiate the rate after six months." If you pay your credit card bill in full each month, the interest rate won't matter.

Don't shop for several cards at the same time. That mistake--called shotgunning your credit--is sure to sabotage your chances. "Any time you apply for a card, you get the credit process started," says Paul Richard of the National Center for Financial Education. Card issuers checking your credit report will see the other inquiries and assume the worst--that you'll get the cards and use the entire credit limit. If issuers think you have too many cards, they'll be less confident that you'll be able to pay your debts. "Each inquiry counts anywhere from two to five points off your credit score," says Kelly Snowden of American Credit Consulting, which works with consumers who have credit problems. Pulling your own report to check its accuracy has no effect on your score (for more on credit scoring, see "Ahead," on page 22).

Being rejected for a credit card can also hurt your chances of being accepted for one in the future. But those direct-mail offers promising that "you've been preapproved" for credit really mean that you've been preapproved to apply for a card. "You can still be turned down," says Meagher.

The quick route. One of the fastest ways to get credit is to apply for a secured card, which requires you to deposit money in a savings account or CD that is frozen while you have the card. "That takes the risk out of it," says Robert McKinley of CardWeb.com, which tracks credit cards and their rates. McKinley chose secured cards for his two sons as their introduction to credit.

The amount of the deposit varies. For example, you'll need to put down $99 for a Capital One secured Visa or MasterCard (800-445-4523) to secure a credit limit between $200 and $500. The card charges 19.8% interest, and there is a $29 annual fee. McKinley prefers Amalgamated Bank's secured MasterCard (800-365-6464). Although the card carries a $50 annual fee and requires a $500 deposit for a $500 limit, it has a lower interest rate--15.9%--and pays 4% interest on the deposit.

Make sure that the issuer will eventually upgrade the card to one that is unsecured. Capital One, for instance, will upgrade a card after six months for customers in good standing.

Sometimes customers who have bad credit ratings or habitually bounce checks are forced to use secured credit cards, which can be a red flag to other credit issuers. To avoid tarring good applicants with the same brush, some lenders, including Capital One and Amalgamated, report all the cards they issue as unsecured. Before applying for a secured card, find out how it will be reported to the credit bureaus. Avoid issuers that deal exclusively in secured cards and don't offer the option to upgrade.

With so many legitimate alternatives, don't be sucked in by Web sites that promise to get you a card, or that charge exorbitant or unnecessary fees. Some cards charge an application fee, a processing fee and an annual fee--and if you're late paying those charges the issuer slaps on a penalty and charges interest retroactively. "You'll have a credit line of $500 and a balance of $450 before you've even used the card," says Snowden. Unless the charge is an annual fee or a deposit for a secured card from a reputable issuer, don't prepay for a credit card.

Reporter: COURTNEY MCGRATH