The most important part is getting started. Building good credit habits can benefit you for the rest of your life. We look at Credit Cards as practice for Mortgage, Car, Student and other big lines of credit that most people need in life. Here’s 6 tips to getting started
1.Know your credit score.
You want to make sure there is nothing on there that would prevent you from getting a card (credit freeze, missed cable payment, collection agency, fraud, etc). There are plenty of ways to check your credit score, a lot of banks will let you check your FICO score for free. Citi you go to Services > Credit Management >FICO score. Chase you go to “My Credit Journey”. If you have a banking app on your phone, play around with it for 5 minutes and you should find something that allows you to check your credit score once a month for free. If all fails or you just want to see all your credit inquires go HERE (www.annualcreditreport.com). This is a government ran site and gives you your 3 scores and a record of all your credit inquiries, ever. Credit Karma is also pretty good. You can get your score quick HERE
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If your score is 650 or higher you shouldn’t have any problem getting a cash back card, financing card, or brand collection card. If your score is 700 or higher you shouldn’t have an issue getting any airline card, hotel card, cruise card, or intro universal point card. If your score is 750 or higher you shouldn’t have any issues getting whatever card your heart desires, unless you’ve had 5 or more cards in the past 2 years
2. If you’re getting your first credit card, start at the bank you have an existing relationship with.
A bank that you already have a checking and/or savings account with is a lot more likely to approve your application than a bank you’ve never worked with before, especially for your first credit card. If you don’t have an active checking account I’d recommend calling a banker at your local Chase (or another bank with a banking bonus) and seeing if you can open a checking account and credit card at the same time.
3. Start small, End big.
If you’re getting your first card odds are high you won’t be approved for the American Express Platinum or a high end card. Don’t feel bad about starting off with a student card or a cash back. It’s a step in the right direction and you will reap the benefits of it later if you can prove to the banks and yourself that on-time payments and credit limit management is a breeze.
4. Have the spending for your intro bonus planned out.
Don’t take on cards with bigger intro spends then you can manage. The idea of missing out on an intro bonus makes me cringe and it should make you cringe too. Intro bonuses is where all the juice is hiding.
5. Make your payments on time.
Your credit card should have 4 pieces of information on your payment; payment due date, minimum payment due, statement balance, and total balance above. If you don’t make a payment at all you will be charged a late payment fee, usually at least $30. If you make a payment for the amount of your minimum payment due you will not be charged a late or missed payment fee but the remaining balance on your card will be charged at least 20% interest (unless you have 0% intro APR). If you pay off the full statement balance you will not be accessed any fees or interest. Always pay your full statement balance off at least! No need to pay off the full balance to avoid interest.
6. Don’t go overboard.
Your credit score decreases 5-20 points every time you open a new card. In my experience, it usually takes about 2-3 months of on time payments to get your score back up to where it was before and then 4-6 months to see improvements above the old score. The shortest amount of time I would recommend between new cards, to maintain a healthy credit score, is 3 months.