When Should You Get Your First Credit Card?

When Should You Actually Get Your First Credit Card?

With an overload of options, applying for your first credit card can seem confusing. You know you want to establish good credit, but what’s the best way to do it?

Additionally, many new adults are unaware of the proper steps to increase their credit score. They open a line of credit simply because they can. There’s no strategy and before they know it, their outstanding balance is in the thousands.

Here are a few things you should know before you get your very first credit card. Do you think you’re ready? Continue reading to learn more.

Understanding debt-to-income ratio

Before you fill out your first application, take a moment to understand the term “debt-to-income ratio”. In simple words, this means the amount of debt a person holds in comparison to the amount of income they make. Lenders, use this factor as a way to measure your ability to make payments.

While it seems simple to maintain 1 credit card now, later on, you will need more things. Keep in mind the idea of a house, a new car, as well as other living expenses.

If you keep your debt-to-income ratio low, you will always have space for these larger purchases. However, if you consistently impulse buy, and spend more than you can afford, you will have no room to grow your credit later.

With that being said, here is when you know it’s time to apply for your first card.

1. You have a steady source of income

First and foremost, you should have a steady source of income. You need the ability to pay off the debt you accumulate. Your probability of getting approved for your first credit card increases the longer you are employed at the same job.

2. You are able to save money

If you find yourself spending every last dollar you make, it’s best to hold off on a credit card. Take some time to learn to save before applying. Not only will this will prepare you to use your card wisely, but it will also ensure you have the mindset to support it.

3. You have a plan for your existing debt

The millennials of today are swamped with student loans. Before you sign up for your first line of revolving credit, take your existing debts into consideration. Statistically, failing to plan is why millennials report having the highest percentage of consumer debt. It’s easy to charge, but not always so easy to pay it off when you have other responsibilities.

4. You have researched your options

Lastly, you are ready for your first credit card when you have researched several options. There are cards available to those without established credit. There are also selections for introductory rates and low APRs. Take your time to see what’s out there before signing up.

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