First of all, credit cards can be a force for good if you use them correctly or else, they become your worst enemy. This article is all about how to get your first credit card. You’ll also learn how to use it so that you get all the benefits such as better credit and protected purchases, but none of the hassles like interest payments and fees.
Step 1: What’s your score?
Before you even start looking through the endless options of cards out there, one thing will really help narrow down your choices. Head over to Credit Karma and check out your credit score.
Warning: You will have to input your social security number. If you are uncomfortable with this, you can get a credit report from annualcreditreport.com or many banks offer free reporting within their app or online banking portal.
Step 2: Pick the card
Once you’ve figured out what you’re working with, picking you first credit card is much easier. Since I’m not a credit card reviewer, I will link some great articles that will give you plenty of card options based on your score.
Excellent Credit (750-850): This WalletHub article
Good Credit (700-749): This WalletHub article
Fair Credit (640-699): This WalletHub article
Poor/No Credit (Under 640): This WalletHub article
Some things to keep in mind when picking a card are:
1. Which bank is it hosted by? Sometimes it’s easier to choose a card through your current bank so you don’t have to make a new account. If you like other options better, don’t worry. It’s usually simple and easy to create a new account!
2. Are there annual fees? There are generally enough no-fee options out there that you won’t have to pay for an annual fee. Do your research to find one that works for you!
3. Is your credit score low or do you have little to no credit history? You may have to go with a secured card that will require you to put down a security deposit. Don’t worry, though. We will talk about ways to upgrade to an unsecured card real quick!
4. Do your research so you can be confident your application will be accepted. Multiple applications negatively affect your credit score. Whenever you apply for a credit card, it’s important to be fairly certain that you will be accepted. Otherwise, you’ll have to submit another application elsewhere. Read more about how credit card applications affect your credit score here.
Step 3: Apply and Get Approved for Your First Credit Card
Most credit cards require you to apply usually via an online form. Although this may sound daunting, it’s actually pretty easy. You usually have to supply basic information such as name, address, etc. You will also have to supply your SSN and financial information such as income and current monthly debt payments. This helps credit card providers assess you for risk and decide whether to accept your application.
For security purposes, make sure you are applying directly through the bank’s website. I never really use links through finance blogs or other promotional pages just to be safe.
Once you’ve filled out the application, most banks will instantaneously approve or reject it. If approved, you can proceed to create an account and set up all of your preferences.
If rejected, you must be strategic in how you attempt to apply for another card. Like I mentioned above, too many applications will affect your score negatively. Try finding a card that you are confident you will get approved for! You may have to look at cards intended for lower credit scores.
Using Your First Credit Card
If you successfully completed the previous steps, then congratulations! You have your very first credit card. Using this card the right way is critical in building credit. There are a few main rules of thumb to follow especially for the next few months.
1. Pay your bills on time every time.
This is the single most important thing that credit bureaus take into account when calculating your score. If you make those payments, you’ll see your score creeping up over time. Miss only one and it can be pretty bad!
2. Keep your balance as low as possible.
This comes as a surprise to many. You may think that credit bureaus want you to use as much credit as possible. The reality is that charging a lot to your card relative to what your limit is creates a red flag that you may be stretching yourself too thin. The rule of thumb is to keep your charges to the card under 30% of the total limit.
This may seem like a bummer especially if you’re starting out with a $1000 limit. This means you should really only keep a $300 balance at any one time. The good thing is that as your credit score improves, you will be able to get approved for higher credit limits. Building credit is definitely a long game.
3. Your first card doesn’t have to be your last.
If you were disappointed that your score didn’t allow you to apply for those fancy rewards cards that pay you in points, flights, and cash to use it, don’t be too upset! The whole point of getting this first card is so that you can gradually upgrade until you’re sporting that platinum Amex (jk not everyone ends up with one of those).
For real though, if you follow these basic guidelines, you’ll be well on your way to getting access to more credit and better rewards!