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5 credit card tips every college graduate should know

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Congratulations, graduate! You’re about to launch yourself into the real world, navigating new experiences like jobs and apartments—and, in many cases, applying for your first credit card.

Why should you consider getting a credit card? Establishing a positive credit history is an essential part of post-college life—especially because your credit score could determine how much interest you pay on your car loan or whether or not you get approved for your next apartment.

We’ve put together a list of five credit card tips every college graduate should know, from how to build good credit to how to maximize your credit card rewards. Read our list before you fill out your next credit card application—and read it again once you get approved for your new credit card.

1. If you don’t know your credit score, check it (for free)

The first thing you’re going to want to know as a new college graduate is how to check your credit score. Many credit card issuers offer free credit scores to cardholders, making it easy to know where you’re starting from and track your progress over time. Log into your credit card account to check whether your issuer provides your credit score.

If you don’t have a credit card yet, there are other ways to check your credit score for free. CreditWise from Capital One, for example, is a free app that monitors your credit history, provides updated credit scores and offers tips to help you improve your score—and you don’t have to be a Capital One cardholder to download and use CreditWise. American Express offers a similar service called MyCredit Guide.

2. Prequalify before you apply

Many new graduates don’t realize that every credit card application they complete has the potential to temporarily lower their credit score. This is because credit issuers track how often you apply for credit—and if there are too many new credit inquiries on your credit report, your credit score will suffer.

This is tough on younger people because they often fall within the “fair” credit score range, making it hard to know whether they’ll be approved for a credit card. That’s where prequalification comes in handy. Here’s how it works: The credit issuer performs a soft credit check, which doesn’t impact your credit score but gives the issuer the information it needs to determine whether you are likely eligible for a particular card.

Credit card issuers sometimes send prequalified offers in the mail or through email. Another way to get prequalified is to use Bankrate’s CardMatch™ tool, which will tell you what cards you’re most likely to be approved for from a variety of issuers.

Once you’re ready to apply for your new credit card, the credit issuer will perform a hard credit check. This credit inquiry is reported to the three major credit bureaus (Equifax, Experian and TransUnion) and will be included in your next credit score assessment. But don’t worry—If you keep your new credit inquiries to a minimum, the impact on your score will be minimal.

3. Pay your bills on time and keep your balances low

Five factors impact your credit score: payment history, amounts owed, credit mix, account age and recent inquiries. Your payment history and credit utilization ratio are the two most important factors in your FICO credit score—which means that if you miss a credit card payment or max out a credit card, you could do significant damage to your credit.

So when you’re trying to build credit quickly, the two most impactful things you can do are pay your bills on time and keep your card balances as low as possible.

Some people mistakenly believe that leaving a small balance on their credit cards will improve their credit score. This myth is not only incorrect, but it will also cause you to throw away money on interest. For good credit, pay your bills in full as often as you can, and make every payment on time.

4. Upgrade your student credit card

Many college students don’t realize they can upgrade a student credit card after graduation. Instead of canceling your student credit card and applying for a new line of credit, you can call your issuer and ask to upgrade your existing credit card.

There are a few reasons this is better than canceling and applying for a new card. For one, you get to keep your credit account active—which adds to the length of your credit history and has the potential to boost your credit score. Plus, you get to maintain your relationship with your credit issuer. If you used your student credit card responsibly during your college years, your issuer may offer you an upgraded card with a higher credit limit, a lower interest rate and better rewards.

5. If you’re not earning credit card rewards, it’s time to start

It’s never too early to learn about credit card rewards. The more you understand about earning and redeeming rewards, the more you’ll be able to get out of your credit cards—and the best rewards credit cards have a lot to offer.

There are two major types of credit card rewards. Cash back credit cards offer a percentage of cash back on every purchase (think of it as a tiny discount), and travel credit cards offer points and miles that can often be redeemed for travel bookings or statement credits toward previous travel purchases.

Many cards offer heightened rewards in specific spending categories, like groceries or online shopping. These types of cards can be lucrative if you make the most of them.

If you’re planning on furnishing a first apartment, for example, a credit card like the Amazon Prime Rewards Visa Signature Card could save you a lot of money. It offers 5 percent cash back at Amazon.com and Whole Foods Market; 2 percent cash back at restaurants, gas stations and drugstores; 1 percent cash back on all other purchases and a sign-up bonus worth as much as $150.

You may also want to consider the Capital One Quicksilver Cash Rewards Credit Card—or, if you’re still working on building your credit, the Capital One QuicksilverOne Cash Rewards Credit Card. These flat-rate rewards cards offer 1.5 percent cash back on every purchase and are great introductions to the world of cash back credit cards.

Here’s one last tip—if you want to get the most out of your credit card rewards, be sure to always pay your credit card bill in full. Carrying a balance comes with interest charges, which could cost you more than you’re earning in credit card rewards. Don’t make a purchase you can’t afford to pay off just because it earns 5 percent cash back!

The bottom line

Knowing how to use credit cards responsibly can save you money, put you on the path toward good credit and set you up for a strong financial future. Once you understand how to track your credit score, build a positive credit history and maximize your credit card rewards, you’ll be better prepared for your post-college life—no matter what happens next.

Written by
Nicole Dieker
Personal Finance Contributor
Nicole Dieker has been a full-time freelance writer since 2012—and a personal finance enthusiast since 2004, when she graduated from college and, looking for financial guidance, found a battered copy of Your Money or Your Life at the public library. In addition to writing for Bankrate, her work has appeared on CreditCards.com, Vox, Lifehacker, Popular Science, The Penny Hoarder, The Simple Dollar and NBC News. Dieker spent five years as writer and editor for The Billfold, a personal finance blog where people had honest conversations about money. Dieker also teaches writing, freelancing and publishing classes and works one-on-one with authors as a developmental editor and copyeditor.
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