Applying for Your First Credit Card: 7 Helpful Tips
Applying for your first credit card is exciting, but it’s important to educate yourself beforehand and practice good credit habits from the beginning. Follow these seven tips to help keep your financial future healthy.
1. Get Savvy about Credit Scores
Know the essentials about your credit report and score before applying for credit. Your credit score is a three-digit number that’s calculated based on multiple factors including:1
- Payment History
- Credit Card Utilization
- Length of credit history
- Total Accounts
- Number of Credit Inquiries
Remember, a poor credit score may prevent you from attaining financial goals like qualifying for a low-interest car loan.
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2. Check Your Credit Report
Get into the habit of reviewing your credit report on an annual basis. Mistakes on your report may impact your score so you’ll want to take care of any errors before you apply for any form of credit. You’re legally entitled to one free credit report a year from each of the three credit reporting agencies: Equifax, Experian and TransUnion. Visit AnnualCreditReport.com to request your report.
3. Look into Secured Credit Cards and Student Credit Cards
When you’re just beginning to build your credit, look into cards that require little or no credit history. The best first-time credit card for you may be a secured card or student credit card. With secured cards, your credit line will equal the amount of the required one-time cash deposit after you are approved. The difference between this and a debit card is that your on-time payments help establish a credit history.
Also consider a student credit card with a low annual percentage rate (APR) and a rewards program. You could earn cash back on purchases that will come in handy when it’s time to buy books.
4. Choose a Rewards Card that Matches Your Needs
Student credit cards with rewards are just one type of the hundreds of rewards cards available. With so many different rewards cards to choose from, it can be challenging to find the right card. Since rewards are earned based on the amount of your purchases, identify what you want out of your credit card and apply for cards that make the most sense for your lifestyle and spending habits. For example, Discover it Chrome gives you 2% cashback on gas stations and restaurants on up to $1,000 in combined purchases each quarter.
Be sure to pay attention to annual fees when evaluating rewards card offers. If you find yourself carrying a balance consistently, you may want to switch to a non-rewards card with a lower APR.
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5. Limit the Number of Applications
Be wary of applying for too many credit cards at once. Too many credit providers inquiring about your history in a short period of time can have a negative impact on your score. It may appear that you are either having a hard time being accepted or are about to take on more debt. These are known as â€œhard” inquiries into your credit history. â€œSoft” inquiries such as requesting your own credit report, employers checking your background and lenders looking to pre-approve you for a loan do not have the same negative effect.1
Avoid signing up for too many credit cards at once by only applying for the ones you’re most likely to qualify for based on your current credit score.
6. Be Ready to Prove You Can Make Payments
To get approved for a credit card, you’ll need to provide proof that you have the ability to make payments. Credit card companies may need to verify your income to determine if you qualify for credit. They may also review your current obligations by obtaining information such as the amount of rent payments.
If you are a student you may also need to provide information such asÂ your college or university’s name, state and city and proof that you are currently enrolled.
If you’re under 21 and can show you have enough independent income, you may be able to get a student credit card on your own.
7. Understand Credit Terms and Conditions
When you sign a credit card application, you’re agreeing to the terms and conditions in a contract.
By gaining a solid understanding of the fees, interest rates, reward program details and other specifics that apply to your credit card you’ll be better prepared to understand what you’re agreeing to and learn the consequences of not using the card properly. You can also be sure you are utilizing all the benefits the card has to offer that you may not know about otherwise, such as rental car insurance, fraud protection or extended product warranties.
Building credit takes time and patience, but it’s well worth it. Follow these first credit cards tips and you’ll be on your way to establishing a great credit score and a solid financial future.