Build Your Credit

I did not receive my first credit card until after my junior year in college. I understand a parent’s concern in that their child will max out their card, destroying their credit score in the process. Yet, not owning a credit card out of fear is just as harmful to your credit score as abusing a card. No credit is viewed as bad credit. Sure, you may have one open line of credit in the form of student loans, but opening one or two revolving accounts with credit cards are a good way of building your credit before graduation, thus opening doors to cheaper rates in the future and presenting yourself as financially stable to landlords, loans, and so on.

The first question is one will ask themselves is what card should I apply for? There are multiple issuers (Visa, MasterCard, Discover, American Express) across many banks, credit unions, and companies. As a newcomer to credit cards, it would be wise to apply for a card with no annual fee. Next, is to do research at the credit ratings that the card accepts. As someone will no to little to no credit, American Express will more likely accept you. Many credit cards are intended for students specifically like Discover it card.

Once you get accepted, keep in mind your credit limit. Sure, you were given a limit of $500 but do not use the full $500. Once you use more than 30% of your limit and do not pay it off before the next credit score update, it will hurt your credit score. A safe margin would be 15% of your limit. Keep in mind that you do not have to wait until your due date to pay off your card’s balance. You can minimize your balance by paying it off weekly. That way you know that your monthly balance will be paid off in full and not be concerned about paying any fees or interest.

Keep in mind that a credit card is not giving you money. Every cent spent will be taken out of your checking account sooner or later. Besides building credit, credit cards offer many rewards and benefits a debit card will not. Cashback or exclusive access to events are some that even a first-time cardholder may be able to rack up.