Monday, November 7, 2011

Newbie Guide: How to Get Into the Credit Card Game

In this post, my goal is to introduce you to credit card sign-up bonuses since it is the easiest way of earning miles and points for amazing redemptions. People say that credit cards are bad and is the number one reason for people having a lot of debt. Yes and no. There are many people who use up their credit limit leaving a large revolving balance on top of a ridiculous interest rate which is not good since the interest will keep on accumulating. What I recommend you to do is to use the credit card like a debit card. In other words, only spend how much you are able to pay off so you will not have a revolving balance. 

If you have no credit history then these are my recommendations to you since rewards cards require a good credit score of usually 700+ along with a credit history of usually one to two years. 

1. Apply for a student credit card or a credit card from a store like Macy's since these tend to be the easiest cards in regards to approvals. This will open up a credit line and history for you which is necessary. 
2. Use your credit card for a year or so while paying off your balances in full. 
3. Register for a credit score monitoring service like the USAA CreditCheck Monitoring Service so you can look up your credit score, be alerted when there is an inquiry and look at your credit history. 
3. Once your credit score is at least 700+ consider applying for a rewards credit card. If you get approved then great! If not, consider using your card and paying off the balances in full for another few months before trying again. 

If you are worried about the credit score monitoring service doing "hard inquires" or credit bureaus lowering your credit score since you will be able to access your history and information, do NOT worry. I've been using this service for a few months and never had this happen to me. My scores have been going up ever since it took a drop after I applied for a few credit cards. 

Remember, when applying for credit cards do NOT go crazy and apply for a lot of credit cards! There are people who "churn" and do an "app-o-rama" which is at your risk since I don't recommend it for many people. The main reason is because your credit history would be full of inquires which can lead to future denials from mortgages, car loans, student loans, credit cards, etc. etc. These inquires would be on your credit history for two years before they are "erased". Since many companies do an inquiry on your Equifax and Experian score, make sure you don't exceed twelve inquiries on each bureau in a year. 

In my next few posts, I will write about the best credit card deals as of right now. 

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