After being approved for your first credit card, it's completely normal to be cautious about your spending. If you're new to the world of credit, navigating scores, applications, interest, and terms can be confusing and may worry you when it comes to making a responsible decision. Use these tips to help you prepare for your next financial milestone.
Understanding Your Credit Score
Whether you're a college student, just started your first job, or simply have relied on the cash in your bank account until now, becoming familiar with your credit score and the factors that impact it is an important step in your journey to understanding how financial institutions and other lenders evaluate your
credit application. Here's an overview of the details that will be carefully reviewed:
- Credit utilization
- Number of late payments
- Number of open accounts
- Length of credit history
- Hard inquiries on your credit score (simply put, a credit check)
There are tons of different models out there that identify ranges of "good" credit scores. According to Equifax, credit scores between 670 to 739 are considered good; 740 to 799 are considered very good; 800 and up are deemed excellent.
If You Can't Pay It, Don't Spend It
Yes, credit cards are a great tool for making large purchases and improving your credit score, but you shouldn't confuse credit with free money. You'll need to pay back every dollar you spend, often including interest. In the case of credit cards, interest is the amount you pay in addition to money charged to your card. Interest is calculated against the principal amount borrowed from the lender; consider it as paying the financial institution for loaning you money.
Make Payments on Time
To avoid a drop in your credit score that could prevent you from getting other credit cards,
mortgages, and loans, you should keep track of when your payments are due and create a payment schedule—many mobile banking applications allow you to set up automatic payments.
Find a Credit Card That's Right for You
There are plenty of options for credit cards out there, and trying to figure out what the best option is can be overwhelming on your own. Take advantage of
financial planning services from your bank to help reach your long- and short-term financial goals. Getting approved for your first credit card on your own, especially if you're under 21, can be especially difficult. It may be worth considering asking another adult in your life to add you as an authorized user on their credit card, or to co-sign on a student credit card.
The trusted financial advisors at Liberty National Bank can help you or your child navigate the complexities involved with applying for a credit card for the first time. We serve customers throughout central and northwest Ohio and offer a variety of
resources to help them make informed financial decisions.
Speak to a member of our team today to learn more about how we can provide support.
Whether you're a college student, just started your first job, or simply have relied on the cash in your bank account until now, becoming familiar with your credit score and the factors that impact it is an important step in your journey to understanding how financial institutions and other lenders evaluate your credit application. Here's an overview of the details that will be carefully reviewed:
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