Getting Your First Credit Card: A Step-by-Step Guide
So you've come of age and are ready to join the world of credit? Getting approved for your first credit card is an important milestone on the journey to establishing a strong credit history and score. Having good credit can open doors, helping you qualify for the best rates on loans, credit cards, mortgages, auto financing, apartments, and even some jobs in the future.
However, getting approved for that first card isn't always a cakewalk - credit card issuers want to see proof that you're a responsible borrower before extending a line of credit to you. By understanding exactly what they're looking for and following some simple steps, you can maximize your chances of getting approved and begin building credit the right way.
Assess Your Current Credit Situation
Before firing off applications, it's wise to get a baseline understanding of where your credit currently stands. Most people won't have existing credit history when applying for their first card, so your credit scores likely won't be ultra high or ultra low. But checking for any errors, fraudulent accounts, or other derogatory marks is still highly recommended.
You can get free copies of your credit reports annually from the major bureaus (Experian, Equifax, and TransUnion) at AnnualCreditReport.com. To view your actual credit scores, many banks, credit card issuers, and financial apps provide free access through their website or mobile app. Checking your reports and scores won't hurt your credit.
If your credit looks decent for someone with a thin file, you should be in an okay position to apply for entry-level credit cards made specifically for those with limited or no credit history. If there are errors or negative items you'll want to file disputes and get those corrected with the credit bureaus first before applying.
Consider Getting a Co-Signer
For those struggling to get approved on their own due to no credit history, one option is to apply for a card that allows co-signers. Having a co-signer substantially increases your approval odds as the credit card issuers can rely on that person's income and credit history to mitigate their risk.
A co-signer agrees to share responsibility for the debt, becoming 100% obligated to repay if you default on payments. For this reason, only those you completely trust should co-sign, such as a parent or spouse. Defaulting could severely damage their credit as well as the relationship.
Alternatively, you could become an authorized user on someone else's established credit card account. This allows you to bypass applying altogether and instantly start piggybacking off their good credit history to build your own.
Choose the Right "Starter" Card
After thoroughly reviewing your credit profile, it's time to research card options and choose one (or two) that best fit your current situation and financial capabilities. There are cards out there that cater specifically to consumers with little or no prior credit history.
Student credit cards are one of the most popular first credit card choices for young adults looking to establish credit. They typically have relaxed approval requirements, only asking for proof of enrollment at a qualifying college or university.
Other entry-level options include basic cash back and travel rewards cards targeted at credit newbies, as well as unsecured cards that require a refundable security deposit to reduce risk in case of default. Secured credit cards can be excellent for building or re-establishing credit from scratch.
When comparing your options, important factors to weigh include:
- Annual fees or monthly service charges
- Standard APR for purchases and balance transfers
- Minimum required credit limit or deposit amount
- Cashback rate or rewards rate/type (travel, gas, etc.)
- Foreign transaction fees for international purchases
- Whether it does a hard pull or soft pull on credit
You'll also want to consider factors like your income, monthly expenses, housing costs, and existing debt obligations (student loans, car loans, etc.) to determine what credit limit and payments you can reasonably handle starting out.
Apply Strategically and Get Approved
With a promising card or two selected based on your credit profile, it's time to submit your application(s). Most major issuers allow you to apply quickly online in 10-15 minutes, either on their website or mobile app.
You'll need to provide basic information like:
- Full legal name, date of birth, Social Security number
- Current and previous home addresses (typically 2 years)
- Phone number and email address
- Housing situation (rent, own, live with parents)
- Total annual income from all sources
- Total monthly rent/mortgage payment
- Existing loans, credit cards, and other debts
During the application, issuers will do a hard credit pull to review your full credit report and score. This creates a new inquiry on your credit report, which can temporarily knock a few points off your score. So it's wise to space out applications for multiple cards over several months rather than applying for everything at once.
If you get approved - congrats! You're now on your way to building your credit from the ground up. But the work has only just begun.
If rejected, don't get discouraged. The issuer should send you an adverse action letter explaining the specific reasons for denial. Common ones include insufficient credit history, low income, or too many recent credit inquiries. Use this as a learning experience and give it some more time before applying again.
Manage Your New Account Responsibly
With your first card secured, your top priorities should be developing stellar payment habits and keeping your balance low relative to the credit limit. This will help build a positive credit history and increase your credit scores month after month.
Make at least the minimum payment due on time each month, as payment history is the most important factor in credit scoring models. Establishing a pattern of on-time payments gets you off on the right foot.
Even better - pay your balance in full by the due date when possible. This allows you to avoid interest charges, which can really add up with today's double-digit APRs. Consider setting up autopay to never miss a due date.
It's also wise to keep your credit utilization ratio - your balance compared to the total credit limit - in the single digits or teens. For example, if your starting limit is $500, keep your balance below $75. Exceeding 30% utilization can negatively impact your credit scores.
Tracking due dates, creating a budget, and monitoring your spending can help keep balances low. Many card issuers provide notification alerts and budgeting tools within their mobile apps to stay on top of your finances.
Over time as you consistently exhibit good credit behavior, you can request credit limit increases from your issuer. Higher limits will improve your credit utilization and enable you to get approved for more premium credit cards at even better terms.
The journey to mastering credit and achieving excellent credit scores starts with these first steps. Develop the right habits now like making payments on time and spending within your means, and you'll be well on your way to financial success.
The information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.
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