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Dr. Don Taylor, CFA, Bankrate.com advice columnistTips for getting first credit card

Dear Dr. Don,
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

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Dear Amber,
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 bureaus. 

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 user on their credit card or qualifying and applying for a student card.

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, no loan.

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 card search 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 Credit Card Basics 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."

Bankrate.com's corrections policy-- Posted: March 8, 2007
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