Watch the video to see the three steps everyone should take when applying for their first credit card or loan.
When you apply for your first credit card or loan, lenders try to determine how likely you are to pay back what you borrow. They look at a lot of different factors, but start by following these guidelines:
All of them can help you build a strong credit history. Some are common. Others are more rare. Select one of the icons to learn more.
Loans used to finance education. You borrow the money, generally each school period, and pay it back in fixed payments after you finish school.
You make payments on monthly bills like utilities, cell phones, and gym memberships. Although these aren’t types of credit, sometimes your payment history on these can impact your overall credit history, especially if you miss payments.
If you own a car, you make a fixed payment every month over a preset period of time.
A credit card lets you borrow money from a lender to make purchases and then pay it back later. The amount you pay back each month depends on how much you borrow.
A secured card is a special type of credit that’s similar to a credit card, but requires a security deposit as collateral for your account. That means you deposit an amount of money up front and the bank holds it for you. Then when you use your secured card, it helps build your credit history.
Even though it’s not a form of credit, your rent can be reported on your credit history. That means if the rent is in your name and you are making your monthly payments on time, you could be building your credit history right now.
Step 1: Establish a relationship with a bank
It’s easier to get your first card if you already have a checking or savings account.
Step 2: Have an income
This could be income from a job, a regular allowance, or another source.
Step 3: Apply for a credit card
Many financial institutions, offer credit cards for customers who are new to credit or who are rebuilding credit.
If you are having trouble qualifying for a credit card, a secured credit card could help. A secured credit card requires a security deposit, which is held as collateral for your account and cannot be used to make payments.
It’s a smart way to begin to establish a good credit pattern, because unlike a debit card or a prepaid card, secured credit card payment information is reported to major credit bureaus. Then, as you build a positive history, you may qualify for other forms of credit in the future.
Starting out with a College Credit Card can help you establish credit while you’re in college. When you’re ready to rent an apartment, set up utilities, apply for a car loan or a mortgage for yourself, having established credit helps.
Follow these guidelines and use your credit responsibly, and you’ll be on the path to good credit.
For more about building and managing your credit, visit our Smarter CreditTM Center.
What if I’m declined when I apply?
There are many factors that are considered when you apply, and a lender will give you the reason that you were declined. Don’t give up — talk to your banker about your options. Find a branch >
The three credit reporting companies
They collect and keep a record of your credit history. Lenders and consumers can contact them for information.
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