First credit card: a simple guide

Without a credit history, it can be a struggle to get your first credit card. But it’s by no means impossible. Here’s how you could boost your chances of being accepted first time round.

Without a credit history, it can be a struggle to get your first credit card. But it’s by no means impossible. Here’s how you could boost your chances of being accepted first time round.

Anelda Knoesen
From the Money team
9
minute read
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Posted 14 JANUARY 2021

Applying for your first credit card

Getting your first credit card can feel like you’re caught between a rock and a hard place.

You’ve never had a credit card before, so you haven’t had much chance to build up a credit history. Without a decent credit history, it can be tough getting your credit card application accepted.

Credit cards, like mortgages, loans and overdrafts, are a form of borrowing credit. Unfortunately, with little or no credit history, lenders see you as a high risk. A good credit history shows you can be responsible with money and manage your finances.

That’s certainly not to say it’s impossible to get a credit card as a new borrower. There are options available for first time applicants. It just means the number of credit cards you could apply for, and the credit limit you’d be given, might be limited.

There are things you could do to help boost your chances of getting your credit card application approved first time round.

Before you apply for your first credit card

Before you apply for your first credit card, do a little groundwork to improve your chances of success.

  • Register to vote: Being on the electoral roll provides proof of your address which could boost your credit score.
  • Name on billing address: Make sure your name is on the bills at the address you're living at – the same address you use to apply for the credit card. Energy bills and mobile phone bills can all be used.
  • Get a job: Even a part-time job can show you have an income and are able to make repayments – you might struggle to get a credit card if you have no income at all
  • Open a bank account: Managing a current account well can help to show you are financially responsible and could help improve your chances of being accepted
  • Pay your bills on time: If you can show you’ve been paying bills on time for the past six months, lenders have evidence that you could be trusted to pay back credit – but missed or late payments would go against you

Top tip

Set up direct debits for regular payments like your mobile phone contract and car insurance. Direct debts could be a great way to help to show lenders that you can reliably manage your finances. Also, they take away the risk of missed or late payments. Just make sure you’ve always got enough money in your bank account each month to cover the direct debit payments.

Credit card eligibility criteria

Lenders tend to set their own criteria, so it can depend on the credit card you’re applying for. But in the UK, typically you have to be:

  • over 18 years old
  • a UK resident
  • employed
  • earning a certain amount, depending on the credit card lender

Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.

What’s the best first-time credit card?

There are many types of credit card, but when you’re first starting out, these might be your best choice:

Credit builder credit card
Credit building credit cards are specifically designed for people with a poor or low credit rating. They typically start with a relatively low credit limit, usually between £100 and around £1,200. This can go up once you start proving your ability to manage credit. They tend to have a higher annual percentage rate (APR) than standard credit cards. But as long as you make your repayments each month, you should be able to start building up a good credit score.

Student credit card
If you’re a student currently registered on a course for a minimum of two years, you might be considering  a credit card specifically for students.

Student credit cards typically have a low credit limit to help you avoid building up a lot of debt. There’s usually no annual fee to pay, and some come with 0% interest for a certain period. But always check the terms and conditions before you take out a credit card.

Both these cards could work for first time borrowers. Once you’ve proved you can manage your credit responsibly, you could then consider moving on to another type of credit card in the future.

For example:

  • 0% purchase credit card - lets you pay off the amount you’ve spent over a set period without paying any interest. But you’ll need to make sure you clear the debt before the pre-arranged 0% period ends, to avoid paying interest.
  • 0% balance transfer card - lets you move outstanding debt from a credit card with high interest onto one with a 0% interest rate for a set period of time
  • Rewards credit card - comes with rewards when you use the card (usually air miles, shopping points or cashback, depending on the card)

What to look out for when applying for your first credit card

Once you’re ready to start comparing first time credit cards, there are a few things to look out for:

APR

The Annual Percentage Rate (APR) is the total cost of borrowing you’ll pay over the course of a year. It includes the interest and any annual fees applied to your credit card loan.

When it comes to APR, there are two important things to look out for:

  • Introductory APR – some cards come with a low or even 0% introductory APR which lasts for a few months. Once the introductory offer ends, you’ll most likely be put on the lender’s standard variable rate, which can be a lot higher. Make sure the card is paid off in full before the introductory rate ends, or you could face a massive hike in interest charges.
  • Representative APR – this is one you need to watch out for. When lenders advertise their APR, it’s only ‘representative’. This means they have to offer this ‘best rate’ to only 51% of successful applicants – typically those with a very good credit rating. The actual APR you’ll be offered will be based on your financial circumstances and credit history. It could be much higher than the advertised rate.

Credit limit

This is the maximum amount you’ll be able to spend on your credit card. As a new, first-time customer, it might not be very high. But by paying off your balance on time each month, you might be able to increase this over time.

Fees

You should also check out any fees and credit card charges you might need to pay. For example, late payment fees, fees for using your card abroad, cash withdrawal fees and charges for going over your credit limit.

What else do you need to know about using a credit card?

If you’ve never had a credit card before, there are some important things you need to watch out for:

Minimum repayments
You must pay at least the minimum amount each month. The due date should be shown on your credit card statement. If you pay less than this, or are late with the payment, you could be hit with charges and even have a low interest or 0% deal taken away. Always try to pay more than the minimum, or even better, pay off the full balance each month.

Cash withdrawals
Don’t use your credit card to take out money from a cash machine. You’ll be hit with hefty fees and higher interest from the moment you take out the money until you pay it off. Use a debit card for cash withdrawals instead.

Section 75
Section 75 is a type of credit card purchase protection. Under the Consumer Credit Act, if you buy something between £100 and £30,000 and there’s a problem, you might be able to get a refund. Just be aware though that this isn’t absolutely certain in every case. It depends on the relevant facts, including the supplier’s terms and conditions, the Visa or Mastercard scheme rules, as well as the card issuer’s approach.

Credit card debt
Used sensibly, credit cards might be a convenient source of credit. And if you manage your credit card well, you’ll build up a history of paying it back for lenders to see. Some bureaus might give you a better score if you also have some balance on the credit card, typically less than 25% of your total credit limit.

But miss a couple of payments or go over your limit, and you could find yourself in spiralling debt.

Research from Compare the Market reveals that 32% of young adults don’t pay off their credit card debt at the end of every month, while 39% of 18 to 24-year olds are uncomfortable about getting into credit card debt.

By budgeting sensibly, only borrowing what you can afford to pay back, and carefully managing your spending and repayments, you should avoid the pitfalls of mounting credit card debt.

How to apply for your first credit card

Applying for a credit card is a fairly simple process. You can apply in person, by phone, or online. If it’s your first time, you might prefer to apply through a local branch so you can talk to someone in person.

You’ll need to give details including your:

  • name and address
  • date of birth
  • employment status
  • income
  • nationality

When you apply for a credit card, the lender will do a ‘hard search’ of your credit history. This is marked on your credit file for two years. Making too many applications in a short period of time can look bad and damage your credit score. If you’ve been declined, be very careful not to apply for another card too early. It may also be that a credit card isn’t right for you at this moment in time.

Never just randomly apply for a credit card. Do your homework, read all the information carefully and compare cards to find the deal that’s right for you.

Compare credit cards

Not only can we help you to shop around and compare credit cards, but we also offer a ‘soft search’ eligibility checker. This could give you a better idea of which cards you’d be most likely to be accepted for. And as it’s a ‘soft search’, it won’t affect your credit score in any way.

Try our credit card eligibility checker

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