wiseGEEK: What is a Personal Line of Credit?

A personal line of credit is an unsecured revolving line of credit that applicants can use in a variety of ways. It is extended through a bank and is often linked with checking accounts, so that applicants can use the credit as an extension of their regular bank account. The amount of the credit line varies, depending on the bank and the credit history of the applicant.

Unsecured lines of credit are provided without the need for collateral. Credit cards, for example, are often unsecured, by contrast with home loans, which use the home itself as collateral for the loan. Revolving lines of credit have a revolving balance and payment, rather than a fixed rate of payment.

Personal lines of credit can be used for things like buying a new car, purchasing furniture, or dealing with other life expenses. As soon as the credit line is activated, the recipient begins to receive monthly statements that disclose the balance, interest, and minimum payment. People can choose to pay off their statements, or carry a balance, depending on their financial situation.

When people need a set sum to deal with an unexpected expense, they often choose between personal loans and personal lines of credit. A personal loan is a fixed sum that is distributed all at once, with the recipient being required to make set monthly payments for the life of the loan. By contrast, a line of credit can be used and accessed at any time, with the recipient taking as much or as little as is needed, and the monthly payments are not set. Some people prefer this flexibility to the more restrictive personal loan.

Recipients can access a personal line of credit in a variety of ways. The credit line may be linked with a checking account, or the recipient may have checks or a credit card associated specifically with it. Cash transfers between the personal line of credit and a bank account can also be made to make funds available.

People who want to apply for credit will need to fill out an application and undergo a credit check. A strong credit history is the key factor in whether or not the application will be accepted, with good credit increasing the amount of the line of credit.

4) That was helpful. A few credit card companies have used the tradeline word and I had no idea what they were talking about. I just figured that since I had open revolving credit that instead of applying for credit cards (different issuers) I guess I should have asked for a personal line of credit, but I have or had other issues that make my situation a bit different. I'll use this to help me figure out some other topics that are confusing!

3) @ ValleyFiah- I would dispute some of your claims as far as the cost of the personal line versus the credit card. I have a credit card through my credit union. I also have a car loan with the same credit union. My credit is only fair (670 range), but my interest rate on both my truck and my credit card are well below the rates I could have received form my bank where I hold my checking account.

Most banks are running their personal line of credits at about 12.25%, but my no-frills platinum card is at 8%. If I would have chosen the card with the points, it would have been ten percent (I opted not to since I carry a balance, and the points are only equal to 1% cash back). When I bought my truck my national bank wanted a 16% interest rate on my loan, but the credit Union approved me at 10.7%. I would recommend shopping around. Credit unions are not for profit so they have the biggest benefits to members.

2) @ Frammaker- an unsecured personal line of credit is essentially an unsecured revolving line of credit that is linked to your bank account. They are similar to a credit card, except they usually have a lower interest rate, do not charge for cash withdrawals, and rates will fluctuate with the current market rate. If you qualify for a personal line of credit, you will find that they are often more versatile than a credit card, and cost less in the end. You can essentially use the line of credit the same as you would use cash in the bank. I would recommend the personal line of credit if you qualify, simply for the interest savings.

1) What is better, a personal line of credit or a credit card? I have been working vigilantly to earn good credit over the past few years, and it is now good enough to qualify for good credit deals. Until now, I have only kept one credit card, one department store card, and an automobile loan. I would like to open a new line of credit, but I do not know what I should choose. I do not need a loan, so I am not concerned with info on personal lines of credit vs. personal loans. Can anyone tell me the difference between the two?


The Minimum Yearly Income to Qualify for a Credit Card

Having a credit card comes with requirements -- including an ability to repay any debt.

They’re easy to carry, come with features galore and seem like free money at the cash register -- until the bill comes. Welcome to the wonderful world of credit cards. In the past, companies have granted credit cards to people with no income. Then came the Credit CARD Act of 2009. While there is no minimum income amount required to qualify for a credit card, there are standards.

The Credit CARD Act of 2009 was designed to rein in credit and encourage financial institutions to provide credit only to those who can truly afford it. Under the law, which took effect in February 2010, no one under the age of 21 can be approved for a credit card unless they either show proof of sufficient income to pay the bill or obtain a co-signer, such as a parent, guardian or spouse. The bill also addresses fees, minimum payments and rate increases.

The new rules require lenders to verify that the borrower can afford to pay for the maximum limit on the card. It is up to the lender to determine how much the borrower can afford. Lenders get this information via a new set of statistical tools that estimate a borrower’s income based on credit bureau information, employment information, IRS tax databases and the credit card application. If you have an income of $25,000, for example, the lender may decide that you would be able to pay off a credit card with a $2,000 limit. If you have income of less than $10,000, the lender might decide that you qualify for a credit card with a $500 limit.

Another important key to obtaining credit is an established checking account. Many lenders frown on applicants who don’t have a viable way to pay their bill. By showing that you have a checking account, you show a potential lender that you can write a check or pay online with funds coming from your checking account. It also helps to have a savings account. Even if you’re only able to keep a small amount in savings, it’s nice to be able to check the box on a credit application that says “yes” to both checking and savings accounts.

When applying for a credit card, you’ll need the usual information, such as name, Social Security number and mother’s maiden name. You’ll also need to indicate how long you have lived at your current residence and how long you’ve been at your current job. In both cases, the longer, the better, as it shows stability. Using credit responsibly will help you establish a positive credit history -- a must when you want to buy a car or purchase a home.

Based in the Pacific Northwest, Todd Duvall has been a writer since 1983. He has written for various local, regional and national clients, winning numerous awards. Duvall received a Bachelor of Arts in communication from Washington State University's Edward R. Murrow College of Communication.


Get Better Credit Card Deals With Pre-Qualified Offers

Jun 16, 2015 | Updated Apr 04, 2017

You’ve probably been annoyed with credit card offers in the mail, inviting you to apply for this card or that, but if you’re in the market for a new card those offers can actually be quite valuable.

There are two important aspects to pre-qualified credit card offers:

1: Knowing That You’ll (Likely) Be Approved

When you receive a pre-qualified credit card offer (also known as pre-approved or pre-screened offers) it may indicate that you’ve passed certain requirements set by the card issuer. If your credit was pre-screened, you can know that you’ll likely be approved for that card if you apply for it soon after, taking much of the mystery out of the application process.

To know whether an offer already considers your credit look for the “PRESCREEN AND OPT-OUT NOTICE” somewhere in the fine print. If you see that, your credit history has been considered. If you don’t, then this is a more generic offer that was not sent to you based on your credit history.

When your credit history has been checked, the offer is a “firm” offer, which means that the credit card issuer can’t change the terms of an offer after it is made unless there is significant new information or there are major changes to your credit history since the offer was sent.

Do Pre-Qualified Offers Hurt My Credit?

No, pre-qualified offers do not hurt your credit at all.

However, when you apply for a credit card (whether you were pre-qualified or not) you will generate a hard inquiry on your credit report, which will have a slightly negative effect on your credit score. This is a temporary effect and not usually something to be too concerned about.

2: Actively Seeking Offers For Better Credit Card Terms

Some of the offers you get will actually feature better terms for the cards than what you’ll find publicly available. These are designed to entice you to apply for the card, but also as a reward to you for meeting the card issuer’s credit criteria.

Some of the better terms you may find include:

  • More points or cash back for spending a certain amount
  • A longer 0% introductory interest rate for purchases and/or balance transfers
  • A reduced interest rate for purchases and/or balance transfers
  • A different combination of interest rates and rewards (more of one, less of the other, etc.)
  • Possibly other card features

What many people don’t know is that you can actually seek out and request these pre-qualification offers on the websites of the major credit card issuers. There’s usually an easy-to-find link or section that includes a form asking for some personal information, often your location and the last digits of your SSN.

When you make the request, you’ll generate a soft inquiry on your credit, which does not hurt your credit score. Take note that you will not be able to request pre-qualified offers if you opt out of pre-approved credit offers.

Then, if you’re eligible, you’ll be able to view some credit cards that you’re pre-qualified for. Sometimes these will be the same offers that you’ll normally find on issuer websites, but in many cases you’ll find a better deal.

So, if you’re searching for a new credit card or think that one of your old ones could use an upgrade, take a few minutes to see what pre-qualified offers are available for you.

List of Pre-Qualification Request Sites by Credit Card Issuer

See what credit cards you may be pre-qualified for, for free and without hurting your credit.

Wells Fargo (current accountholders may have

access to pre-qualified offers upon request)

Q&A Video: What Does It Mean To Be Prequalified For A Credit Card?

Metal Credit Cards You Can Get Right Now
Review of the Blue Business Plus Credit Card from American Express
Review of the Amex EveryDay and Amex EveryDay Preferred Credit Cards

The Amex EveryDay and EveryDay Preferred Credit Cards earn lots of rewards at supermarkets, but is one of them best for you? Read this to decide.

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