i want to get my first credit card but i dont know where to start.

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Contributor

I just joined the army and left home. I want to start working on my credit score but im a little scared to get a credit card. how can i build a good credit score?


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@Raye102

Congrats on joining the Army and let me thank you for your service.  As a recent military retiree, I understand the decision you made and as an Advice Director, I also understand the importance of credit.  Before we get into some “Tips to get your credit on the right track” which I will borrow from my peer Mikel Van Cleve who recently wrote a blog on this topic, lets see why you might need credit in the first place.

 

Your credit score can be viewed as your trustworthiness with money.  Those with a higher credit score have shown themselves more trustworthy than those with a lower credit score.  That’s because poor financial decisions usually lead to a lower credit score.  Defaulting on a loan, missing rent payments, or even bankruptcy all lower your credit score.  A higher credit score also usually means lower interest rates on loans and easier access to money when needed. 

 

With that in mind, how is your credit score used beyond applying for a credit card?   Lenders use it to determine if they will lend you money to buy a car or a home.  Landlords use it to see if you are likely to pay them rent month after month.  The military also uses it to see if you are at risk of taking financial bribes in exchange for divulging military secrets.  Yes, you can lose your security clearance due to poor financial habits.

 

And since you mentioned credit cards, a credit card is a good way to begin building your credit score.  You might start out with a secured card but over time, after showing responsible use of credit, you can switch to an unsecured card and then hopefully compete for lower interest rates.  However, remember that credit card interest rates only matter if you carry over a balance and pay interest, which isn’t required to build your credit score. 

 

Now that we understand how our credit score is used and how important it is, let’s see what Mikel said about how to build and improve your credit score. 

 

​The FICO score is calculated from these five factors:

  1. Your payment track record
  2. How much you owe
  3. How long you've had credit
  4. Whether you're requesting new credit
  5. The types of credit accounts you open

Next: How do you Raise your Score?

  • Pay all of your bills on time, every time. That affects a third of your score
  • Don't carry a credit card balance or, at a minimum, keep it below 25% of the limit. Some say 10% and others say 30% -- bottom line is the lower, the better
  • Responsibly manage a variety of debts, such as a car loan, a mortgage, credit cards and student loans
  • As a general guideline, keep older credit accounts open and only open new ones when necessary -- not just to get a one time discount or free t-shirt

Even if you change bad financial behaviors, improving your history takes time. Late payments remain on your credit report for seven years.

 

The further you put your missteps in the rearview mirror, the less they hurt your score. If your report is otherwise pristine, the impact of a late payment will become less over time​.

 

"At least once a year, it's smart to check your credit report so that you can see for yourself the snapshot lenders are getting of your credit history,'" says Mikel Van Cleve, advice director. "It's also important to check your credit report for accuracy."

 

Having good credit can really make a difference but racking up debt doesn't have to be part of it, he says. Good credit history could lead to better rates on a home loan, potentially saving thousands of dollars in interest. "You just have to know how to use credit responsibly," says Mikel. "It's up to each individual to be disciplined with their finances."

 

You are off to great start by asking the right questions and getting information. I wish you the best of luck and hope you will reach out if you have additional questions or concerns.

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2 REPLIES

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@raye102, Thank you for your service and for trusting USAA! Please go to our website and click on the Advice tab at the top. We have a lot of great resources there including "Debt and Spending". Lots of info there about improving credit score. Once you have studied up on that, click on Products at the top, to Credit Cards. There you can compare all the cards that we have! Thanks again and have a great weekend.  ~Tom

Highlighted

@Raye102

Congrats on joining the Army and let me thank you for your service.  As a recent military retiree, I understand the decision you made and as an Advice Director, I also understand the importance of credit.  Before we get into some “Tips to get your credit on the right track” which I will borrow from my peer Mikel Van Cleve who recently wrote a blog on this topic, lets see why you might need credit in the first place.

 

Your credit score can be viewed as your trustworthiness with money.  Those with a higher credit score have shown themselves more trustworthy than those with a lower credit score.  That’s because poor financial decisions usually lead to a lower credit score.  Defaulting on a loan, missing rent payments, or even bankruptcy all lower your credit score.  A higher credit score also usually means lower interest rates on loans and easier access to money when needed. 

 

With that in mind, how is your credit score used beyond applying for a credit card?   Lenders use it to determine if they will lend you money to buy a car or a home.  Landlords use it to see if you are likely to pay them rent month after month.  The military also uses it to see if you are at risk of taking financial bribes in exchange for divulging military secrets.  Yes, you can lose your security clearance due to poor financial habits.

 

And since you mentioned credit cards, a credit card is a good way to begin building your credit score.  You might start out with a secured card but over time, after showing responsible use of credit, you can switch to an unsecured card and then hopefully compete for lower interest rates.  However, remember that credit card interest rates only matter if you carry over a balance and pay interest, which isn’t required to build your credit score. 

 

Now that we understand how our credit score is used and how important it is, let’s see what Mikel said about how to build and improve your credit score. 

 

​The FICO score is calculated from these five factors:

  1. Your payment track record
  2. How much you owe
  3. How long you've had credit
  4. Whether you're requesting new credit
  5. The types of credit accounts you open

Next: How do you Raise your Score?

  • Pay all of your bills on time, every time. That affects a third of your score
  • Don't carry a credit card balance or, at a minimum, keep it below 25% of the limit. Some say 10% and others say 30% -- bottom line is the lower, the better
  • Responsibly manage a variety of debts, such as a car loan, a mortgage, credit cards and student loans
  • As a general guideline, keep older credit accounts open and only open new ones when necessary -- not just to get a one time discount or free t-shirt

Even if you change bad financial behaviors, improving your history takes time. Late payments remain on your credit report for seven years.

 

The further you put your missteps in the rearview mirror, the less they hurt your score. If your report is otherwise pristine, the impact of a late payment will become less over time​.

 

"At least once a year, it's smart to check your credit report so that you can see for yourself the snapshot lenders are getting of your credit history,'" says Mikel Van Cleve, advice director. "It's also important to check your credit report for accuracy."

 

Having good credit can really make a difference but racking up debt doesn't have to be part of it, he says. Good credit history could lead to better rates on a home loan, potentially saving thousands of dollars in interest. "You just have to know how to use credit responsibly," says Mikel. "It's up to each individual to be disciplined with their finances."

 

You are off to great start by asking the right questions and getting information. I wish you the best of luck and hope you will reach out if you have additional questions or concerns.

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