Building credit can help you achieve your financial goals—whether that’s buying a vehicle or becoming a homeowner. A simple, effective way to build your credit is through responsible credit card use. By making purchases on credit and paying your balance on time, you show that you’re a responsible borrower. You establish a record of being trustworthy—and potentially improve your credit score.
When applying for a credit card, companies often want validation that you’ll be a good borrower. If you’ve never had a credit card or loan, it can be difficult to provide proof of your trustworthiness. But with a few tips in mind, you could be on your way to getting your first credit card.
1. Understand the Basic Requirements
Each credit card company has different parameters for borrowers. In general, though, there are a few basics that you must meet in order to be approved.
First, to get a credit card in your name, you need to be old enough. In most cases, you must be 21 years old. Some credit card companies allow 18-year-olds to apply, along with your guardian’s permission or a verifiable source of income. A minimum age is set as this indicates you are legally able to enter into a contract.
Second, you need to have an identification number when applying, typically a Social Security number. If you don’t have a Social Security number, some credit cards allow passports or an individual taxpayer identification number (ITIN) instead. Your unique number links your account to your identity. It allows the credit card company to report your payment history and any past due balances to the credit bureaus.
Third, credit card companies want to know that you have a source of income. If you don’t have a way of making money, how will you pay for your purchases?
Fourth, most creditors check to see if you have a positive credit history. They’ll run a credit check and look at your credit score. If you haven’t had a credit card or loan before, it’s likely you won’t have a credit history. That doesn’t disqualify you from getting a credit card, though. If other requirements are met, a creditor may give you the opportunity to start building your credit with them.
2. Know Your Credit Score
Your credit score is one component that companies consider when they decide whether or not to approve you. Credit scores tell a company how trustworthy of a borrower you are, such as how likely you are to repay them on time. There isn’t a minimum score you need in order to be approved, but one of the major credit bureaus, Experian, offers these general guidelines for getting a credit card:
- Lower than 499: Less likely to be approved for credit; subject to unfavorable terms
- Between 500-600: Likely to be approved for credit, although terms might be unfavorable
- Between 601-780: Good chance of being approved with positive terms
- Between 781-850: Very likely to be approved; best terms available
You can check your credit score for free in a few ways. You can sign up for an app like Mint that allows you to track your spending and pull your free credit score every week. For those with who’d also like to keep track of their debt and loans, apps like Turbo help you monitor your debt and credit score all in one place. You can also request your credit score from a credit card company or bank.
You are entitled to a free credit report every year. While the report won’t contain your credit score, this will allow you to monitor your history for any inaccuracies or fraudulent activities. Knowing your credit score gives you insight as to how likely it is to be accepted for a credit card and what terms you might be eligible for.
3. Build Your Credit
As you build your credit history and boost your credit score, you’ll be able to apply for credit cards with better terms and better rewards. Here are some financial habits to put in place to strengthen your credit.
Become an authorized user on someone else’s card: Make purchases on credit and pay them off by being an authorized user on a family member or friend’s account. Ensure the person you’re sharing an account with is responsible and pays their balances on-time.
Add rent payments to your credit report: If you’re paying rent, sign up with a rent reporting service. The three major credit bureaus—Equifax, Experian and TransUnion—accept rent payments for building a credit history.
Apply for a student credit card: Begin building credit by applying for a student credit card. You need to be enrolled in college or a vocational school and meet age and income requirements.
Pay your past-due and late accounts: Pay off any debt that’s overdue, especially any accounts that were sent to collection agencies. Continue to make payments on time to help build up a positive credit history.
Fix errors: Your credit report may include entries that shouldn’t be there, like errors or fraudulent activities. These errors can dramatically lower your credit score. Review your free credit report and dispute any errors as quickly as you can.
4. Choose the Right Credit Card for You
There are a plethora of credit card options out there. That’s why it’s essential to narrow down your options so you find a card that meets your needs and helps you build credit.
First and foremost, check the requirements needed for approval. Each time you submit an application for a credit card, the company runs a hard inquiry on your history. Hard inquiries can impact your credit score—and not for the better. If you have multiple hard inquiries in a short period of time—such as three inquiries in a month—it can be worrisome to potential lenders. That’s why it’s important to apply for credit cards you’re likely to be approved for. Look for requirement information, such as a minimum credit score or expected income level, before you apply.
Second, be aware of the two main types of credit cards: secured credit cards and unsecured cards. Typically, it’s easier to be approved for a secured card if you don’t have a credit history. A secured credit card requires collateral, such as a cash deposit. If you make your payments, you’ll get your cash deposit back. In most cases, credit cards are unsecured and don’t require a cash deposit. Unsecured credit cards tend to have better terms and lower fees.
Third, consider the annual percentage rate (APR) and annual fees of the credit card. The APR tells you how much you’ll pay in interest on any monthly statements you don’t pay in full. The lower the APR, the less you’ll pay. The annual fee is how much you’ll be charged each year to keep that credit card open.
Fourth, credit cards often provide rewards for making purchases and paying your balance on time. Some give you points for every dollar you spend that can be redeemed for gift cards or products. Others offer a cash reward, such as 1% cash back on your statement. Opt for a credit card with a reward system that will motivate you to pay your bills on time.
5. Apply For Your Credit Card
When you apply for a credit card, you’ll fill in basic fields like your address and phone number. You’ll also be asked about your gross income and if you want to add any authorized users. Take your time to fill out the application accurately and completely.
It’s important to only apply for one credit card at a time. Why? Because multiple hard inquiries on your credit report can damage your credit score. It can signal to potential lenders that you’re having a hard time getting approved. That’s why you should wait to hear if you get approved before applying for other cards.
But don’t be worried if you don’t get accepted to the first card you apply for. Go through the process with another card or two, and make sure to apply for cards you’re likely to be approved for.
6. Follow Up
Most credit card companies send an approval within seconds of submitting an application—but some take up to a week or two. An initial denial isn’t the end of the road, though. You can call for reconsideration. A representative can tell you why your application was initially denied. You can defend your application, provide them additional information or correct any mistakes from your application. Talking with a representative kindly and honestly humanizes your case. In the end, they may approve you for the card.
By opening a credit card, you’re giving yourself an opportunity to build your credit. Remember to search for the right card for your situation, and aim for one that’s likely to approve you. With a solid history and a good credit score, you’ll be on your way to other financial milestones and possibilities.