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Best first credit card to build credit

Here's how to find the best starter credit card, even if you have little or no credit history

Summary

If you have little or no credit, getting your first credit card is a great way to start building it. Here’s how to find the right starter card for you.

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There’s a first for everything, and that includes launching your credit history with your first credit card. Fortunately, there are credit cards designed specifically for people with no credit. It will be important, though, to pursue a credit card account you’re likely to qualify for and that matches your lifestyle.

“Getting your first credit card can be a great tool for establishing and building your credit profile,” says Krista Phillips, executive vice president, head of branded cards and marketing, for Wells Fargo. Here’s how to go about finding the right one for you.

How to find a credit card to build your credit

Each of the major issuers offer a wide variety of credit cards, some with more than a dozen personal cards on the menu. Smaller financial institutions, such as community banks, credit unions, online lenders, and retailers also offer credit cards.

With such an array, deciding on the best starter credit card can be confusing. Here are the steps you need to take to find the card to start building your credit.

Find out if you have a credit history

You may have a credit history already, even without a credit card. “The card you qualify for will depend on a number of factors,” says Phillips. “These include whether you have any credit history, such as an auto loan or student loan, and your ability to repay based on income and other factors.”

So, although you don’t have a credit card yet, you may have loans. As long as they’re in your name, either as the primary or the cosigner, the lender will have been adding your activity with it to the three major credit reporting agencies: TransUnion, Equifax, and Experian. Pull them now from AnnualCreditReport.com to see what is listed. Make sure everything is correct, and if it’s not, dispute the error.

You will also have a credit score. The FICO Score is most commonly used, but the VantageScore is also popular. Both have scales of 300 to 850: 300 to 579 is poor, 580 to 669 is fair, 670 to 739 is good, 740 to 799 is very good, and 800 to 850 is exemplary.

If a credit report hasn’t been developed for you because there has been nothing to report, a credit card issuer won’t have the information they need to objectively analyze what kind of borrower you might be. Acceptance, therefore, will be based on other considerations, such as income and collateral.

Best credit cards to build credit

If you do have a credit score, let that number lead you to the accounts that are in your realm of possibilities.

There are plenty of credit cards for people with good credit, however, there are also credit cards for people with poor and fair credit scores.

For example, Credit One Bank® Platinum Visa® for Rebuilding Credit will consider applicants with scores from 300 to 670. The Citi® Double Cash Card, on the other hand, requires a score of 670 or above.

Refine your search to those in your scoring category so you don’t overreach with one you can’t get or settle for one that doesn’t have the bells and whistles you deserve. Credit cards for people with low credit scores tend to have higher fees and interest rates and basic (if any) perks and rewards programs. Those for people with higher credit scores tend to have lower fees and interest rates, plus more generous perks and rewards programs.

There are also credit cards developed specifically for people with no credit. As you will see, they come in various forms:

  • Student cards. Many college students have not developed their credit history yet so these products are perfect if you fit in this category. In fact, they are designed to help you build your credit history. They are usually unsecured so the credit issuer doesn’t require collateral, but the credit limit is typically low.
  • Secured cards. These credit products require a security deposit, which guarantees the credit line. Therefore, if you put down $500, the limit may be that amount, though some limits will exceed the security deposit. With good behavior, which means paying on time and not going over the credit limit, some issuers will automatically transition the card into an unsecured account and will return your deposit back. Otherwise you’ll get your deposit back when you close the card with zero balance owed.
  • Unsecured credit cards with low limits.. It is possible to get an unsecured credit card but the credit limit will be low. For example, the Petal® 2 “Cash Back, No Fees” Visa® Credit Card offers cards starting at $300. Many credit unions may also allow you to have an unsecured credit card with a small limit.
  • Retail cards. According to Deborah McNaughton, credit expert and author says credit cards associated with specific stores are another option for credit card novices because they often lave less stringent qualification terms. “They can get your foot in the door,” says McNaughton, “Just be careful to pay the bill in full because they tend to have very high interest rates.”

How to choose your first credit card

Be sure to read the disclosure before deciding, so you know exactly what you’re getting into. Credit card agreements are contracts. “Know the card’s interest rate and when it starts, which is usually within 29 or 30 days,” says McNaughton.

If you can find a card with no annual fee, that’s great. It could be be free only for the first year, though, so look for what it will be after that.” Understand the penalty fees, too, she says.  If you don’t meet the minimum payment by the due date, a late fee of up to $28 can be imposed. If you’re delinquent again within the next six monthly billing cycles the late fee can be $39.

“In addition to understanding which card you may qualify for, take care to select a card that fits your lifestyle and typical buying behavior,” says Phillips. Review the positive features before applying.

Even some starter cards come with rewards programs such as cash back, where you earn money as you charge. Others offer rewards in the form of points and miles, and with them you can earn rewards transferable for flights, hotel rooms, products and services, and sometimes cash.

Once you’re confident you can get the card and that it suits you, submit the application. Most allow you to apply online so you’ll know within seconds if you’re accepted. If you do, the card will soon be in the mail.

How to use your first card to build credit

Whichever card you begin with, use it carefully to build your credit. “It’s important to establish healthy credit card habits from the get-go,” says Phillips. Mistakes will end up on your credit report and hurt your credit scores just as you’re trying to increase them.

For a FICO Score, the two most important factors are payment history and credit utilization. Given that:

  • Pay on time. Charge at least once a month so information can appear on your credit report. At the end of the billing cycle you will receive a statement including the due date for your payment. Pay before that date to avoid a late fee. If you are more than one cycle behind, a late payment will appear on your credit report, gravely damaging your credit score. With very little other information on your credit report, a single late payment will be especially damaging.
  • Mind the limit. It is best to only charge what you can afford to repay in full because you won’t acquire debt or be charged interest on revolved balances. If you do want to use the card to pay for something in increments, make sure the balance is under 30% of the credit line to ensure a healthy credit utilization ratio. With a low limit card this will be tricky. If your credit card has a $500 limit, owing no more than $150 will help keep that ratio in good standing.

VantageScores will be developed after only a month or two of credit activity on your reports, but your FICO Scores will be created after you’ve had that one account on your credit report for six months. Initially your scores will be on the low end, but to escalate them:

  • Keep the first account open and active. The longer you have it, the better for your credit history and scores.
  • Mix up your accounts. Don’t stop using that first credit card but consider adding another card to your wallet when you’re ready. With two different accounts in use you will be adding even more data to your credit reports, which helps your scores rise.
  • Apply for new accounts prudently. You do not want to dilute the length of credit history by adding unnecessary new credit cards to the one that you have had for a while. You also don’t want to give lenders the impression that you’re desperate for money, so are applying for many loans and credit cards in a short span of time.

“Patience is key to building up your credit,” says Jennifer Schonberger, a senior financial journalist at Yahoo Finance. “Over time, your bank will expand your credit limit, sometimes without you even requesting) as you repay and prove yourself trustworthy.”

“For many, gamifying this process makes it more interesting and engaging,” Schonberger says.

Be strategic. Set up automatic credit payments, then charge small subscriptions and pay your balance on time. This way you’re proving you can borrow and repay responsibly.

Bottom line

Your first card will help you build your credit, and when your scores are above the 750 mark, the world of credit opens up to you. Credit card introductory 0% APRs and valuable sign-up bonuses may be attractive. And the best cash back cards will allow you to earn large sums of money as you charge. Or, maybe you want a travel card that enables you to rack up points and miles so you can fly and stay at hotels for free, in the lap of luxury.

It all begins with your very first credit card. “Everyone’s credit journey starts somewhere,” says Schonberger. “Starting out with a secured card or low limit is completely fine.”

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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