Credit is a veritable necessity to live comfortably. After all, credit scores are reviewed when you apply for a car loan, to rent a new apartment, to get a job, to open a utility account for your new house and more.
If you have little to no established credit history, getting a credit card and using it responsibly is a great way to establish a credit rating. There are some excellent credit card options to consider if you are interested in building your credit rating in the months to come.
Student Credit Cards
Some major credit card companies offer student credit cards. These are ideal for young adults who are just starting out in life, and many have wonderful features and benefits that you can use to improve your life while also building your credit history with the credit card. For example, some credit cards give you cash back on purchases or rewards points that can be redeemed for travel expenses or merchandise. Some student credit cards also reward you for earning good grades in class. For example, one credit card may give you money back each semester you verify that you have at least a B average. Keep in mind that some credit card companies require you to be at least 21 years old to apply. If you are between the ages of 18 and 21, you may need to get your parent to co-sign on the card. This holds true with most credit cards.
High Interest Rate Credit Cards
If you are not a college student and are looking for a great way to improve your credit rating through the use of a credit card, you may qualify for a high interest rate credit card. Typically, credit cards with a high interest rate do not have an annual fee associated with the account. This means that if you pay your balance off in full each month, you may not pay any fees associated with the credit card, and you can build up a solid credit rating in the process. Because of the high interest rate, you should avoid carrying over debt on your credit card account from month to month. It can be challenging to pay off debt that has a high interest rate associated with it.
Secured Credit Cards
If these two options do not sound appealing to you, another idea is to apply for a secured credit card. These are usually fairly easy to get regardless of your credit scores, and they are available through a wide range of credit card companies and banks. With a secured credit card, you place a deposit on the account when you open it. This deposit is usually $200 to $300, but this amount varies from credit card to credit card. The amount that you put down as a deposit becomes your credit limit on the account.
With some secured credit cards, you can convert the account to an unsecured account after a few months of timely payments. When this happens, your deposit may be credited to your account or returned to you. Your credit limit may also increase on these accounts over time. The interest rate on these accounts varies substantially. However, remember that interest rates are only a concern if you carry a balance over from month to month.
A Co-Signer on Your Parent’s Account
As long as you are over the age of 18, your parent may add you as a co-signer to their own credit card account. You should consider this option carefully. Your parent’s credit history will then be linked to yours through this account, so you should determine if they have a good credit history for this particular account and how responsible they are managing their finances. The last thing you want is for your parents to damage your credit rating through their credit card. On the other hand, if your parents have a stellar credit rating, being a co-signer on their account can give your credit rating a boost.
Keep in mind that your parents do not have to physically give you a credit card if they are not comfortable doing so. They can simply add you as a co-signer so that their financial activities can help you to establish a credit rating. When you have little to no credit history, it may seem like a lot of doors are closed to you. It can take the right strategy to find a credit card that you can use to build credit. Many of these types of starter credit cards should be used for a limited period of time only. After you use one of these credit cards for a few months or years, you should have a good to excellent credit rating. Then, you can apply for a low interest rate credit card that has a great rewards program.