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4 Tips for Using Your First Credit Card


A credit card is a powerful financial tool.

When used strategically, it can help you make purchases and build credit.

Conversely, credit cards can also be misused to run up debt and accrue interest charges.

As a first time credit card user, you’re in total command of your financial future. You have the opportunity to establish smart, repeatable habits throughout your credit journey.

Frankly, many people would love to be in your shoes. According to a recent survey, over 14 million Americans are currently carrying over $10,000 in credit card debt.

Worse yet, over half of the U.S. has credit card debt, with 30% of consumers carrying balances between $1,000 and $5,000, 15% carrying over $5,000 in debt, and 6% saddled with debt in excess of $10,000.

Here are some tips to help you use your new credit card with confidence:

1. Make Payments on Time

We hear you. This point seems so obvious it’s almost insulting.

But here’s the thing: making payments on time is the most important habit you can practice.

For one thing, 35% of your FICO® credit score is determined by your payment history.

In other words, when you make payments on time, your credit score may go up over time. But every time you miss a payment, it goes on your credit report.

According to Experian (one of the big three credit bureaus), “negative information such as late or missed payments…stay on credit reports for approximately seven years."

Pro Tip: Enable automatic payments to ensure your payments make it on time, every time.

2. Limit Credit Usage to 30%

While payment history is the most impactful metric for your FICO® score, your credit utilization ratio comes in at a close second.

After all, 30% of your FICO® score is determined by your credit utilization ratio.

And what is your credit utilization ratio, exactly? In short, it’s the amount of credit you’re borrowing compared to your total available credit limit.

For example, if you have a total credit limit of $1,000 with a revolving balance of $500, your credit utilization ratio would be 50%.

Many financial experts — and the three credit bureaus — encourage consumers to limit their credit utilization ratio to no more than 30%.

A lower credit utilization ratio could positively impact your credit score.

To lower your credit utilization ratio, be specific with the kinds of purchases you put on your credit card. Build a budget that allows you to stay below 30%, and stick to it as much as possible.

3. Don’t Apply for Multiple Cards All at Once

On the one hand, it might make sense to apply for more than one credit card.

After all, you would increase your available lines of credit and extend your financial freedom. Unfortunately, applying for multiple cards in a short period of time may lower your credit score.

According to Experian, credit card applications likely result in a “hard inquiry” on your credit report, which may stay there for up to two years, although they typically only affect your credit scores for one year.

While there’s nothing wrong with having more than one credit card — indeed, the average American credit card applications likely result in a has four different cards — try to wait a few months between applications to protect your credit score.

4. Check Your Monthly Statements

In our digital economy, errors and fraud are inevitable.

To the extent that you can, make it a habit to check your statements at the end of every month. Review all of the charges to ensure they’re accurate.

If they’re not, be sure to let the card company know as soon as possible.

Note: Be sure to request a copy of your credit report every year. As you keep an eye on your monthly credit statements, it’s good practice to monitor your credit history and ensure everything listed is accurate.

To get a free copy of your credit report, visit AnnualCreditReport.com.

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First Phase reports payment history to the three major credit bureaus so it can help build your credit if used responsibly. Building credit is accomplished by keeping your balance low and paying all your bills on time every month. Late payments, missed payments, or other defaults on your account may be reflected in your credit report and may impact your ability to build credit. First Phase begins credit reporting following your first purchase or cash advance using your card.

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This information is presented for educational purposes only. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.