What is the best credit card if I want to start or build credit?

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April 20th, 2006

I received my first credit card as a result of a program which allowed parents to cosign with their children to obtain credit. It had a $200 limit. Every month I charged movies, lunches, and computer games to it. And every month I diligently paid it off with the money I made working at a ski area. By the time I was 21 I had an excellent credit rating with a 4-year history.

I’m not advocating that all 17-year olds should have access to a credit card. But too often I see parents who baby their children, or tell them stories about how horrible credit can be. Credit is a tool, just like a gun or a car. When respected, understood and used appropriately, it has great benefits. When used by someone uneducated and disrespectful of its power, it becomes dangerous.

Getting your credit started is not a terrible situation to begin with. When starting out, you begin with a clean slate; in the eyes of credit companies you are neither risky nor beneficial, and you have the opportunity to prove yourself.

In this case, the first thing you should at are any special programs you are involved in. College students have the best shot at this. Credit companies love students because they often spend large and spend often. They also usually have mom & pop’s salaries to bail them out when they get in trouble.

The best idea is to ignore the recruiters on campus and do your own research online. Go to specific company sites and look for their college cards, or credit-builder cards. It will be slow going for awhile when you start out with a low-limit, but it is also very easy to get limit-raises with these cards. After a couple months of paying your card on time, in full, ask for an increase.

For building your credit, a great option is looking to companies with whom you already hold a card. Ask for a limit increase or a rate decrease. Then look for which agency they pull reports from and find out which other companies pull from that agency. Then contact those companies for a card as well. Credit companies are fierce competitors, and if one of their peers enjoys having you as a card holder, they most likely will as well. Also look to diversify with different types of cards (Visa, MC, AmEx, etc.).

Another good place to check with is a local credit union. They usually can offer competitive rates on credit cards to members who are looking to build credit. The only downside is that they are not able to offer the comprehensive rewards programs of large banks, but the objective is to build credit and work up to those big cards, right?

Also remember, that credit is affected by other factors besides cards. Try to make sure your report is as diverse as possible. Utility companies, student loans, (small) car loans, and mortgages, if kept current and in good standing, are huge boosts to credit.

Entry Filed under: Credit Card Use
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