A good credit score offers a range of benefits. Renting apartments, getting jobs, and availing new credit lines – you can achieve all with a good-to-excellent credit score. You should know what to look for in your first credit card if you want to build credit and obtain a good score. On the other hand, with a bad credit score, you will not only be charged a higher rate of interest but also have to put up with unfavourable repayment terms.
Getting a high score with FICO and VantageScore qualifies you to enjoy the best financing offers from lenders. If you are a newbie in the world of credit and want a good credit score, you should first know how to choose your first credit card after weighing all options.
Is it Easy for People with No Credit History to Obtain a Credit Card?
If you do not have a credit history, lenders will hesitate to extend credit to you. Because they do not have any record of your repayment history, they do not know whether you are a responsible borrower or not. Hence, they may not readily offer you credit. This means you may not get credit cards or loans easily.
Nonetheless, secured cards (like Zolve Azpire Secured Credit Card) have been designed for people who have no credit and bad credit.
What are Secured Credit Cards?
Secured credit cards work on the same principle as traditional credit cards; albeit with one difference. One of the requisites of getting a secured card includes putting up a deposit. Credit cards have no such requirements. Also, as far as secured cards go, the amount of your deposit money determines the credit limit on your card.
Secured cards help people with no credit or bad credit to build credit. You only have to pay your card bills on time for the credit bureaus to take note of your good repayment track record. All this works in your favor and increases your credit score.
Let us now learn more about how to choose a credit card for the first time.
Handy Tips for Beginners to Choose Their First Credit Card
Here are some tips on how to choose your first credit card:
- Low Interest Rates
- No Annual Fees
- Eligibility Criteria
- Reports to Credit Bureaus
- Attractive Rewards
1. Low Interest Rates
You may not know what to look for in a first credit card if you are new to credit. Always remember that the best secured cards (like Zolve Azpire Secured Credit Card) are those that offer low interest rates, for they can help you to save more.
2. No Annual Fees
When you want to know more on how to pick your first credit card, keep in mind that secured cards that come with ‘zero annual fee’ benefits are a good bet. Though, the low-fee secured cards are not all that bad either.
3. Eligibility Criteria
When learning how to pick your first credit card, you should know that most secured credit card companies require you to put up a refundable deposit. Additionally, the amount of your refundable deposit is equal to your credit limit.
In other cases, you may have to open a fixed deposit account, which acts as a collateral, for getting your first credit card.
4. Reports to the Credit Bureaus
When you are learning to choose your first credit card, it is important to know that only those secured card issuers that send reports of your repayment record to the credit bureaus are the best option. If you pay your bills in full before the due date, the security card companies will report it to the credit-reporting bureaus. That way, you can improve your credit score since your payment history affects your credit score by 30%.
5. Attractive Rewards
Secured cards that offer greater rewards are a better option than the ones that come with none. Even so, when you want to know more about how to choose your first credit card, remember that rewards are on offer only for those who pay their bills in full every month.
Getting your first secured card is a good way of establishing credit. Many secured cards are offering the best terms. When studying about choosing a credit card for the first time, please note that it is advisable to go for secured cards that are providing terms that are important to you. Low interest rates, no annual fee, or more rewards are some factors to consider when choosing a secured card. To make the most of your secured card, be sure to use it responsibly.
1. What are the approval rates of secured card companies?
Ans. Most secured cards have high approval rates. You have to put up a security deposit for as long as you are using the card. This helps to mitigate the risk of lenders when giving credit to people with bad or no history. Once you cancel the card and have no remaining balances, you can get your money back.
2. How should you use a secured card responsibly?
Ans. Being responsible with your secured card implies committing to timely payments. Moreover, you should maintain low balances by using your card only for essential purchases; do not go overboard with your spending. Also, try to pay the entire balance due every month; otherwise, you will end up paying high interest on the remaining balance.
3. What are the different factors for calculating credit scores?
Ans. Among factors that help in determining your credit score are the age of your accounts, payment history, credit utilization ratio, and mix of accounts. Your credit report contains all details of the various factors that help to calculate your credit score.
4. How are secured cards beneficial?
Ans. Secured cards help to establish credit. By using secured cards, you can have a repayment record, whereby lenders know how you manage credit. By paying your bills on time and keeping low balances on your secured card, you can get a good credit score and avail a range of financing options.
5. Why do secured cards require deposit money?
Ans. Secured card companies take deposit money to minimize their risk when dealing with people who have a bad credit history or none. The deposit is refundable and you can claim it when you close your card. Though, you must have no balance on your secured card if you want the full deposit money. And if your secured card has balances, the given amount is deducted from the deposit money before handing over the balance amount to you.