One of the most important first steps you can take in your financial life is to start building your credit with a credit card. I’ll tell you how to do that, coming up right now in this episode of 2MinuteFinance.
Whether you’re in college, just graduated, or never had one before, a credit card is a good first step to take to building your credit history. And if you were brought up to pay cash for everything and not incur any debt, think about it this way, it will take you a whole lot longer and put you at a distinct disadvantage when it comes time to buying that new house or car.
Without any prior history, the best cards to look for are is a secured card or a student card.
With a secured card, you can give a lender a certain amount of money upfront as collateral, and in turn, the credit card lender will give you a card for the similar limit. The money you put upfront will help guarantee that if you fail to make a payment, the lender can take your deposit and use it to cover their losses.
Another type of card is a student card, often marketed during on-campus events or through the mail. These cards are not necessarily the best cards available on the market. They oftentimes have looser criteria for qualifying. In some cases, lenders may ask for your parents to co-sign, or take joint responsibility, in order for you to get a card.
Once you’ve decided on the type of card that works best, you need to shop around for a card that fits you. Sites like BankRate.com can help you do some comparison shopping.
Once you’ve applied for a card, don’t get discouraged if you get turned down. It’s the classic Catch-22. You need credit to get credit, but you can’t get credit if you don’t have any credit history. Instead of repeatedly applying, take a look at gas cards or department store cards. They’re oftentimes easier to qualify for and can help you along the road to getting your first credit card.
In our next installment of the credit card series, we’ll talk about the most important part of a credit card, the fine print. For more information and resources, check out my website at 2MinuteFinance.com.
In San Francisco, I’m Bobby Lee for 2MinuteFinance.
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