Applying for Credit for the First Time

Applying for credit for the first time can be exciting. When you start using credit, you can build up your credit score, which opens up the opportunities available to you in the world of finance. For anyone who wants to get a mortgage or take out a loan, having a (good) credit score is essential. The only way to develop a good score is by using credit.

Whether you just turned 18, or you're a few years older but have never used credit before, this guide will help you through the process of applying for credit and developing a good score. Furthermore, we've included a few tips to help you avoid credit debt in the future!

Applying for Credit

Before you begin applying for credit, go ahead and get rid of those dreams of cash-back rewards and free airline miles. You'll get those eventually, but not with your first credit card! For your first card, your options are much more limited.

You'll probably want to go with one of the following two options: a secured credit card or a high interest, low limit entry-level credit card from your bank.

With a secured credit card, you put down the money upfront. This method gives your "lender" the security that should you default on your payment, they already have your money.

The second option functions more like a "real" (i.e. unsecured) credit card. However, be careful not to incur credit debt! With the high interest rates you'll be charged, you definitely want to pay off your card on time and in full every month!

Using Credit

Applying for credit isn't enough. In order to build up a good score, you have to actually use your card. Treat your credit card like a debit card and keep track of how much you're spending. You don't want any surprises at the end of the month!

Credit scoring institutions will check in on your account once a month to see what percentage of the credit available to you is being used. Try to avoid using more than 30% of the credit available to you. Also, you should always carry a very small balance at all times to demonstrate that you are, in fact, using it. Even if you use several hundred dollars every month, if you pay it off in full the credit scoring institutions won't know that you're actually using the credit available to you.

Upgrading

After some time (usually 8 months to a year) of responsible credit usage, you can upgrade to a better "rewards-based" card. However, always be careful of incurring credit debt, and use your card responsibly!

The Lee Law Firm aims to provide local residents with high quality legal representation at affordable rates. Their attorneys specialize in all aspects of credit negotiations. As Dallas debt lawyers, the Lee Law Firm attorneys understand the pressures their clients face as they battle a financial hardship.

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