15% of your credit score is based on how long you’ve had credit. The longer you have a credit card, the sooner you start building your credit score, and the sooner your score raises due to older credit. A line of credit (a credit card, loan, etc.) won’t help your score until it has been open for at least 2 years!
“What credit card should I open first to start building credit?”
Honestly, which credit card you choose is up to you (don’t worry, I will provide links to recommendations) and really depends on your current financial and occupational situation, but there are definitely some criteria you want to follow when deciding:
1. As low of a monthly interest rate as possible
2. You want NO annual fees
3. You want to be able to change your initial credit limit
4. Have some sort of incentive for you (usually cash back)
5. Convenient payment option
The problem is that most credit cards that are advertised as good starter cards with crazy rewards like cash back and triple points also come with a very high-interest rate. What can you expect? You’re a credit baby. Banks make their money from your mistakes.
Certain types of starter cards help you avoid this high-interest rate:
1. Student cards –Generally low-interest rate cards that have low credit limits and minimal rewards
2. Secured cards – Lines of credit that require an initial deposit of some amount as collateral. If the credit limit is $500, your initial deposit will be $500.
3. Credit Unions – Credit Unions are NOT banks. They are nonprofit organizations that offer lower rates and fees than banks.The only problem with Credit Unions is they are regional, so you want to go with the one you have the most reliable access to!