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Rethinking credit: Tips for first-generation credit users

Smiling mixed race woman with afro happily paying for coffee at coffee shop
Cameron Prins/Getty Images
Smiling mixed race woman with afro happily paying for coffee at coffee shop
Cameron Prins/Getty Images
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My parents dragged me, kicking and screaming, to get my first credit card when I was a sophomore in college. After I applied and received the card, I didn’t use it for another year and a half, at least.

I had one mindset, cemented early: Credit is bad, and it’s bad to owe anything to anybody. Credit card companies are predatory. I’m not letting anybody steal my money or make a fool out of me.

This thought process was born directly out of hearing about my parent’s experiences with credit. They are what we would call “first-generation credit users,” meaning their parents (my grandparents) either never had credit or lacked the knowledge to be able to tap into credit as a beneficial tool.

Here’s what I learned about credit growing up, what I’ve figured out since then — and what you can learn from me, whether you’re a first-generation credit user or were raised by one.

Credit “mistakes” vs. making ends meet

Both my parents went to college on full-ride basketball scholarships. They were also first-generation college students, who felt a responsibility for helping with financial needs at home. While in school, my parents would send their Pell Grants straight home to help pay for clothing or groceries for their younger siblings.

Despite earning full-ride scholarships, my parents graduated with student loans, personal loans and utility bills in their name that they never knew about. They also continued to care for their families, in addition to meeting their own personal needs, even after they were finally able to open lines of credit for themselves.

After leaving college, my mother, the eldest of three girls, used her credit cards to fund the needs of her siblings and other family members. “My mom and my sister would come to my apartment with my young niece,” my mother says. “If my niece needed something, whether it was a medical expense or other basics, I would use what I had to help.”

As a first-generation credit user, she didn’t have access to some of the insular knowledge one might need to use credit most effectively. Her priority was taking care of her family, no matter the costs.

There are countless communities with the same kind of story: undocumented immigrants, DACA recipients, first-generation Americans and other marginalized communities. And they all have one thing in common. They are navigating weighty responsibilities alongside the idea of establishing credit.

How my parents’ credit fears became my fears

After becoming a mother herself, my mother continued to carry the sentiment of caring for family first, no matter the cost. But, she still bears the weight of the decisions she had to make in the past.

Today, my mom has one credit card: a Lane Bryant retail card. “It’s paid off and stays in a drawer,” she says, cheerfully. She’s leery of the idea of getting more credit cards, because of her past experiences. “I overextended and didn’t pay enough attention to the details of the cards I was getting. I’m a bit more hesitant and cautious at the idea of credit cards, overall.”

She told me how she’d ended up paying hundreds of dollars in added interest for carrying balances over long periods of time. She mentioned store cards that charged monthly maintenance fees she didn’t fully understand, on top of more exorbitant interest charges that brought her to the brink of maxing out her cards.

As she explained these things to me, I wondered why credit card companies would work so hard against her, adding more and more charges on top of what she was already struggling to pay off. It all translated to me as credit card companies taking her money and preying on her lack of knowledge.

Hearing about my parent’s credit journey instilled in me a strong distrust of credit and credit institutions of any kind. I felt like my parents had been taken advantage of, and I was determined that I wouldn’t let the same happen to me.

And that’s how we end up back at the beginning, in my sophomore year of college, when my mom pushed me to apply for the Discover it® Student Chrome. I had received a preapproval offer in the mail, and my mom suggested I go for it. She said I would need the credit history in a few years to secure my first apartment after college.

To be clear, I didn’t want to apply for this credit card (or any credit card for that matter) because I didn’t want to take what I viewed as a huge risk, and give in to the predatory financial-industry machine. But, because Mom said so, I applied anyway.

I made sure to read every detail in the fine print, as my mother so vigorously warned. It was here where she had felt burned the most, as she wracked up extra fees and charges she was unaware of at the start. She implored me to be fully aware of all terms and conditions, if I was to apply.

I did apply, was approved and received my first credit card. But here’s the catch: I didn’t use it. I thought it would be enough just to have the card, to show possession of a credit line, in order to build my credit. I was wrong about that, as it turns out.

But I was going to do everything I could to avoid using it, so I wouldn’t owe anyone and therefore couldn’t be conned out of my money somehow.

Credit cards are tools we can control

Today, as a media professional in the financial services industry — covering credit cards, specifically, no less! — I’ve learned a lot in a short period of time about how cards work. I view them now as tools you can make work for you.

I see some of what I missed out on when I was afraid of my own credit card. As I dove into educational materials about how credit cards work, I began to understand how to choose the right card for my individual needs, and the do’s and don’ts of using credit cards.

As I cultivated this basic knowledge, I was amazed that the thing I had been so afraid of for so long was turning out to be so useful for building credit. Now armed with the right knowledge, I want to share some tips on how to move forward as a first- or second-generation credit user.

Tips for first (or second) generation credit users

Talk to family members, learn where they’re coming from

Be inquisitive about their unique circumstances. Evaluate how their experience has influenced them, you and the choices that followed. Things that were true back then may not apply now, and vice versa. Note that as times change, needs change — and that’s completely OK.

Do your own research

Once you’ve gathered some background on the experiences of those who’ve come before you, research on your own. Find out how credit cards work in the first place. Look into how interest works or what it would take to apply for a credit card. If you’re looking for places to start researching, use something of interest that someone you talked with before mentioned, and look into it further.

Tap into free resources

A preapproval offer is what got me to my first credit card, but you may want to get a snapshot of your credit standing before looking to apply. If you’re in a first-generation credit situation like my parents were, you may have credit accounts in your name that you don’t know about. In this case, you can use AnnualCreditReport.com to get your free annual credit reports (you get one free set of reports a year).

There’s information available on how to read a credit report and how to dispute any issues. As you get more comfortable with the idea of credit and start to explore options you have the best chances of approval for, there are tools like CardMatch™ that will do that work for you.

If you choose to start, start small

Choose a secured credit card or another credit card for no credit history if you’re just starting out, as those options are often the easiest way to get started from scratch with credit building with a credit card. If you’re able, you could skip the full commitment to your own credit card and become an authorized user on someone else’s credit account. Be sure, if you choose this option, that you pick a responsible credit cardholder, because their credit habits could end up affecting your credit also.

Know that you have options

Maybe you don’t want to start building credit right away because you need to put energy elsewhere, into more pressing matters. That’s fine. These tools will be here when you’re ready. Perhaps you don’t want to start with a credit card at all as your first line of credit. There are other options — such as personal loans, student loans and even other credit tools like UltraFICO and Experian Boost — that use alternative methods for building credit, such as reporting utility bill payments.

The bottom line

Starting anything new is scary, and when you’re influenced heavily by the negative experiences of the people closest to you, especially those who raised you, it can be even scarier. Knowing credit-building tools exist, and learning the best ways to use them, is key to getting started on a fulfilling credit journey. Take everything into consideration and form your own perspective in order to make a decision that works best for you.

Written by
Ashley Parks
Credit Cards Author
As a Bankrate credit cards editor, Ashley Parks is fascinated by the ways people can make credit cards work for them when armed with the right knowledge.
Edited by
Senior Editor