A credit card is one of the best tools for building and repairing credit. Making on-time payments and maintaining a credit card utilization rate under 30 percent are typically smart moves for good credit health. The following are some considerations to keep in mind when it comes time to choose a new credit card:
- Research cards based on your credit score. Your approval odds provide an estimated likelihood that you'll be approved for a credit card, based on your credit profile and data about Credit Karma members who have been approved in the past. Better approval odds don't guarantee that you'll successfully get a card, but they can help you focus your search on cards you're more likely to get.
- Consider choosing a secured credit card to start. If your credit history is short, or if you're rebuilding your credit after damaging events like a foreclosure or bankruptcy, a secured credit card is a great tool to have. It's backed by a security deposit you provide, which serves as a buffer against you defaulting on a payment.
- Read reviews. Credit Karma has thousands of consumer credit card reviews from our members. Find out which cards make customers happy, and which you may want to avoid.
- Compare credit card statistics. On a card's review page, you can see overall information about Credit Karma members who have the card like average credit limit rewarded, average household income, average cardholder age and more.
- Consider your spending personality. For instance, you might choose an airline credit card if you're a frequent traveler.
- Read the fine print. Be sure to know what the terms and conditions are for the credit card you're interested in before you apply.
- Watch your credit utilization rate. It's generally recommended to keep your overall credit card balances under 30 percent of your available credit limits if possible. Lower credit utilization rates suggest to creditors that you can use credit responsibly without relying too heavily on it.
- Automatically apply for the first credit card offer you see. Just because a card advertises a low interest rate or a great rewards package, it doesn't necessarily mean that you'll qualify for the card or that its other terms will meet your needs. You may want to research other cards before making a decision.
- Miss a payment. Your credit score will only benefit from your new credit card if you maintain regular on-time payments. Just one missed payment cam remain on your credit report for seven years and could severely damage your credit score. Consider setting up automatic payments or email alerts to remind you when it's time to pay your credit card bill.
- Carry over a balance to build credit. It's not necessary to carry over a balance from month to month to build your credit health. If you can, pay off all of your credit card balance in full every month to avoid interest payments. If the bill is too large, paying more than your minimum payment can still reduce your accrued interest.
- Pay interest on a store card if you can avoid it. While a store credit card can be a good tool in your personal finance arsenal, it's important to remember that store credit cards typically come with high interest rates.
- Close your other cards. Just because you qualified for a great cash back credit card, it's not necessarily best to close your other credit cards, particularly if you have a lengthy credit history.
- Apply for multiple cards at once. Several hard inquiries over a short period of time can make you appear desperate for credit and lower your credit score. Instead, try to do the research beforehand and apply for just one card at a time.
- Max out your credit cards. Your credit card utilization rate will skyrocket, potentially lowering your credit score and making it more difficult to pay off your balances.
If you have any more questions, head over to our credit advice forums, where you can ask other Credit Karma members about credit cards, as well as other financial topics. When you're ready to apply, find the best credit card for you.
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