Credit card applications have not changed much over time, what has changed is the access to information regarding the available offers (thank you Internet). The online credit card application has revolutionized the consumers ability to find the best card offer for their unique financial needs.
Applying for your first credit card can be a confusing exercise to say the least. I have been surprised many times to hear from others who have reached their 30th birthday without ever applying for a credit card. This is an unfortunate circumstance, as it can be difficult to be approved for credit without prior credit card history.
The approach to successfully applying for your very first card will depend on your age, college enrollment status, and credit rating. It is important to follow an application strategy that fits your situation, to avoid discouraging denials and lower credit scores.
Many major banks offer credit cards designed specifically for college students. Applying for one of these offers is a great way to be approved for your first credit card, and to start a history of responsible credit use. Four years of on-time payments will go a long way to building a healthy credit score. This will be a great benefit to a new graduate when it comes to buying a car, home, or even applying for a job (yes, many employers will check the credit reports of potential hires).
For all of the above reasons we recommend that every college student have a credit card in their own name.
If you’re not a college student, finding the right approach to applying for your first card is a bit more complicated. The right approach will depend on your credit history.
NO PREVIOUS (OR UNKNOWN) CREDIT HISTORY
If you do not have any credit history, or have no idea what your credit score looks like, the first step is to purchase a credit report with a FICO score. It is absolutely imperative that you know your credit status before applying for your first card. Applying for a card that is out of your reach (due to a low FICO score) can further lower your score, thereby reducing the chance of you being approved on your next application attempt.
You may be surprised to find that you do have a credit history even if you have never applied for a card. This can be due to accounts with department stores, utility companies, mobile phone accounts, etc.
If your report does not show any negative information (late payments, etc) and your score is above 600, you can try applying for a “prime” card. Otherwise, you should try applying for a “sub-prime” card.
GOOD CREDIT HISTORY
If you think you have a good credit history… double check. You should still consider ordering a credit report with credit score. After you confirm that your credit history is positive, you should try applying for a “prime” credit card. Look for credit offers that require “good” credit. These cards will offer better features and lower fees and rates then cards designed for people with poor credit.
POOR CREDIT HISTORY
Even without prior credit cards it is possible to have a poor credit history. This is why it is so important to check your credit report and score prior to applying for your first card. Low scores may have been caused by missed utility bill payments, or other related financial activity which is reported to credit bureaus.
If you find yourself in this situation, start by trying to apply for a card designed for people with “fair” credit. If you are approved for this card, great… if not, you can move on to applying for a secured credit card. The initial denial should not effect your ability to be approved for a secured card.
Secured credit cards require a cash deposit. Essentially, you deposit money into a “savings” account and then borrow against your deposit each time you use your secured card. While this may sound like a hassle, it may be the only way (based on a poor credit history) to be approved for your first card. Look at this as a temporary solution to a long term problem. After a year or two of paying your bill on time, you can check your credit score again, and apply for an unsecured card.
To successfully apply for your first credit card you should (1) check your credit score and (2) choose an approach that fits your situation. It is always best to complete a credit card application that you are likely to be approved for (denials can have a negative effect on your credit score). Whatever your credit status, it always makes sense to apply for the best credit card that you are likely to be approved for, and use it responsibly, so that you can improve your credit over time.