Five Credit Card Tips Every College Graduate Should Know

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Congratulations, graduate! You’re about to jump into the real world, take on new experiences like jobs and apartments, and in many cases apply for your first credit card.

Why should you consider getting a credit card? Establishing a positive credit history is an essential part of post-college life, especially because your credit score could determine how much interest you pay on your car loan or whether or not you are approved for your next apartment.

We’ve put together a list of five credit card tips every college graduate should know, from how to establish good credit to how to maximize your credit card rewards. Read our checklist before you complete your next credit card application, and review it once you’ve gotten approved for your new credit card.

1. If you don’t know your credit score, check it (for free)

The first thing you’ll want to know as a fresh college graduate is how to check your credit score. Many credit card issuers offer free credit scores to cardholders, making it easy to see where you’re going and track your progress over time. Log in to your credit card account to check if your issuer is providing your credit score.

If you don’t have a credit card yet, there are other ways to check your credit score for free. Capital One’s CreditWise, for example, is a free app that monitors your credit history, provides updated credit scores, and offers tips to help you improve your rating. You don’t need to be a Capital One cardholder to download and use CreditWise. American Express offers a similar service called MyCredit Guide.

2. Prequalify before applying

Many new grads don’t realize that every credit card application they fill out has the potential to temporarily lower their credit score. This is because credit issuers monitor how often you apply for credit and if there are too many new credit applications on your credit file, your credit score will suffer.

This is difficult for young people because they are often in the “fair” credit score range, which makes it difficult to know if they will be approved for a credit card. This is where prequalification comes in handy. Here’s how it works: The credit issuer performs a soft credit check, which doesn’t affect your credit score, but gives the issuer the information it needs to determine if you’re likely to be eligible for a particular card.

Credit card issuers sometimes send prequalified offers by mail or email. Another way to get prequalified is to use Bankrate’s CardMatch™ tool, which will tell you which cards you’re most likely to be approved for from a variety of issuers.

Once you are ready to apply for your new credit card, the credit issuer will perform a thorough credit check. This credit application is reported to the three major credit bureaus (Equifax, Experian and TransUnion) and will be included in your next credit report. But do not worry. If you keep your new credit inquiries to a minimum, the impact on your score will be minimal.

3. Pay your bills on time and keep your balances low

Five factors affect your credit score: payment history, amounts owed, credit mix, account age, and recent inquiries. Your payment history and credit utilization rate are the two most important factors in your FICO credit score, which means that if you miss a credit card payment or max out a credit card, you could significantly damage your credit.

So when you’re trying to build credit fast, the two most effective things you can do are pay your bills on time and keep your card balances as low as possible.

Some people mistakenly believe that leaving a small balance on their credit cards will improve their credit score. This myth is not only wrong, but it will also cause you to waste money on interest. For good credit, pay your bills in full as often as you can and make every payment on time.

4. Upgrade your student credit card

Many students don’t realize they can upgrade to a student credit card after graduation. Instead of canceling your student credit card and requesting a new line of credit, you can call your issuer and ask to upgrade your existing credit card.

There are several reasons why this is better than canceling and applying for a new card. For one thing, you can keep your credit account active, which adds to the length of your credit history and has the potential to boost your credit score. Plus, you can maintain your relationship with your credit issuer. If you used your student credit card responsibly during your college years, your issuer may offer you an upgraded card with a higher credit limit, lower interest rate, and better rewards.

5. If you’re not earning credit card rewards, it’s time to start

It’s never too early to learn more about credit card rewards. The more you know about earning and redeeming rewards, the more you can leverage your credit cards, and the best rewards credit cards have a lot to offer.

There are two main types of credit card rewards. Cash back credit cards offer a percentage of cash back on every purchase (think of it as a small discount), and travel credit cards offer points and miles that can often be redeemed for travel reservations. or statement credits for previous travel purchases.

Many cards offer enhanced rewards in specific spending categories, like groceries or online purchases. These types of cards can be lucrative if you make the most of them.

If you’re planning to furnish a first apartment, for example, a credit card like the Amazon Prime Rewards Visa Signature Card could save you a lot of money. It offers 5% cash back at Amazon.com and Whole Foods Market; 2% cash back at restaurants, gas stations and pharmacies; 1% cash back on all other purchases and a sign-up bonus worth up to $150.

You can also consider the Capital One Quicksilver Cash Rewards Credit Card or, if you’re still working on building up your credit, the Capital One Quicksilver One Cash Rewards Credit Card. These flat rate rewards cards offer 1.5% cash back on every purchase and are a great introduction to the world of cash back credit cards.

Here’s one final tip: if you want to get the most out of your credit card rewards, make sure you always pay your credit card bill in full. Maintaining a balance incurs interest charges, which could cost you more than what you earn in credit card rewards. Don’t make a purchase you can’t afford to refund just because it earns 5% cash back!

The bottom line

Knowing how to use credit cards responsibly can save you money, put you on the path to good credit, and set you up for a strong financial future. Once you understand how to track your credit score, build a positive credit history, and maximize your credit card rewards, you’ll be better prepared for your post-college life, no matter what happens next.

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