Tips for getting first credit card
I'm 18 years old and I don't have a credit card. I'm looking to
start building my credit but have no idea where to begin. I've applied
for a couple of cards but have been denied. Will this hurt my credit
score? And where is the best place to get a card?
-- Amber Accrete
When I was your age the conventional wisdom was to start with
a "gas card" and a Sears card and work your way up to the majors such
as VISA and MasterCard. It probably wasn't the best advice, considering how
strictly Sears was known for reporting late and missed payments to the credit
Now, with oil companies and department stores
mostly affiliated with a national card, even the Sears card is offered by Citibank,
it takes a different approach to building credit when you're just starting out.
The three common approaches are: getting a secured
credit card, getting your parents to list you as an authorized
on their credit card or qualifying and applying for a student
With a secured card you put down a deposit that
qualifies you for a credit card with a limit equal to that deposit amount.
Some cards allow a credit line higher than the deposit, but I don't recommend
looking for one. The goal isn't to run up a big balance, it's to demonstrate
a payment history.
Along those lines, you want to make sure the secured
card provider will report your payment history to the credit bureaus.
Not all secured cards take that step. That's also true with becoming
an authorized user on your parents' account. If the payment
history isn't reported, then getting access to these forms of credit
isn't building your credit history. It's the information in your
credit report that's used to compile a credit score. Lenders
use the credit score to decide whether to lend to you. No history,
You don't say whether you're a student. Credit
card companies have student promotions to grant credit to people with little or
no credit history. They want to foster a good relationship with you now in
the hopes that you'll continue to keep their card in your wallet after you build
a more substantial credit history.
Credit inquiries stay on
your credit report for two years but only factor into your credit score for the
first year. The more times you're denied credit, the harder it is for the
next lender to decide to approve your application for credit. Don't flail
about searching for someone to approve you because it just reduces your odds of
getting approved by anyone.
You can shop for both secured and
student cards on Bankrate using its credit
feature. The best place to get a card is with the card provider that has
the best package of services, fees and interest rates to meet your needs. Bankrate's
is a good place to start learning about managing credit.
To ask a question of Dr. Don, go to the "Ask
the Experts" page, and select one of these topics: "financing
a home," "saving & investing" or "money."