A new college graduate has some questions about getting a credit card.
How do I get a credit card? You can’t qualify for a card unless you can prove you’re worthy by having a credit history, but how can you have a credit history when you don’t have a credit card?
Kerry Hannon, personal finance and work blogger, offers some answers.
First, some advice to pay off your balance each month.
Sure, you typically need a credit card to pay for big expenses from hotels to airline tickets. I get it. But repeat after me: “I will always pay my credit card bill each month when it’s due — and in full.” If you only make the minimum monthly payment, you’ll likely be slammed with a high interest rate.
Twentysomethings these days often pay credit card rates of 22% or higher (!) because they lack a credit history and may have a low credit score. The average credit score for Millennials, according to the Experian credit bureau, is 628; for boomers, it’s 700.
So when you do get a card, pay your balance each month and be happy that you get about 30 days to make the payment (that’s called the “float”).
Do your homework before applying for a credit card.
… if you don’t have a credit history to speak of, you might want to hold off applying for a card until two months or so after you start working. Card issuers want to see an income stream before they’ll approve you, so by waiting a bit you’ll boost your chances of getting plastic.
Before applying for a credit card, get your latest credit report (free from Annualcreditreport.com) and credit score (free from sites like Credit.com, CreditKarma.com, CreditSesame.com and Quizzle.com). These will let you see what a card issuer would find out about your credit history and prepare you for your chances of being approved. If you see a mistake in your credit report, fix it by following the advice in Next Avenue’s article, Why You Must Check Your Credit Reports for Errors.
Piggyback on your parent’s reputation.
An easy way to build a credit history is to ask your parents to add you as an authorized user on one of their cards. The card will then show up on your credit report, and it’ll have your name on it. Your parents must make on-time payments to the account to protect your credit record and theirs. After about six months as an authorized user, you can then apply for a card on your own.
Or check out secured credit cards that do not depend on a credit history, but require a security deposit.
… With a secured card, you’ll get a credit line of generally one to three times the amount of your deposit. Manage your card responsibly and you may earn credit limit increases. After several months, you can apply for a regular card from the same issuer or from another one.
Once you obtain an unsecured credit card, close your secured card account and your deposit will be returned.
Some recommended sites:
…Visit Lowcards.com to find the best deal. In general, look for cards with no annual fees.