1. The first step is choosing a card to apply for. Student credit cards or a secured credit card — where you put down a deposit — can be easier to qualify for and are tailored for people who are just starting to build a credit history.
Or, if your parents have credit cards, you could see if they’d be willing to add you as an authorized user on one of their accounts. You’ll have your own card, with your name on it, but you won’t need to get approved and can benefit from your parent’s record with the card. (Don’t do this, obviously, if your parents don’t have good credit habits — or if you’re less sure that you will — because it can impact both you and your parent.)
You’ve gotten good advice from others in the Ambition Club, too: “Find a card with 0 monthly/yearly fees. With no fees and always paying off your balance, you will never spend any extra money for using credit,” said one Ambition Club member.
And this is so true. While annual fees on cards with lots of rewards and benefits can be worth it, you don’t want to pay to use a credit card at this stage.
2. Once you have the card, the most important thing is to always pay on time. Even one late payment can hurt your credit score, which is what lenders consider when you apply for a loan.
3. Use it sparingly at first. Crawl, walk, and then run, as they say.
First put a small, recurring monthly bill on your card, like a Netflix subscription. Set up automatic payment with the vendor to ensure your payments are on time and you’re paying your entire balance each month.
After a few months, add a few more basic expenses, like gas for your car. Then, once you’re in a rhythm with those items, you can start using your card for other spending. All along the way make sure to keep paying your balance off in full each month to avoid interest charges.
As another Ambition Club member put it: “Never spend more than you can afford, pay off every month. This is how you build good credit. It's really easy to see the credit limit and think you can spend all that money... But the longer it takes to pay off, the more it costs you. Learn from my mistakes it took me 7+ years to fix my credit after acting a fool in my early 20s.”
4. Consider the credit limit. There’s another downside of overspending. Using too much of your credit limit can also lower your credit score and be a red flag to lenders. As a third fellow Ambition Cluber wisely said: “Don’t max out the card, try to keep your credit usage low. All this helps build your credit rating which will help you whenever you need to take out a loan such as when buying a car or house.” In short, handle your first credit card much like you would learning how to drive. Take it slow and steady, be responsible and careful, and build good habits and confidence through practice. In financial health, Brian Walsh PhD, CERTIFIED FINANCIAL PLANNER® SoFi Head of Advice & Planning
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