Getting credit for the first time
Credit is money you borrow from a lender to pay for goods or services with the promise that you’ll pay it back at a later date, usually at an agreed rate of interest. It can come in different forms, including loans, overdrafts, and hire purchase agreements.
However, one of the most common is credit cards.
When you apply for a credit card, a lender will run a credit check to see what kind of risk you carry as a borrower. This is determined by various factors, including your repayment history, employment status and income, and the number of open accounts you have.
When you’re applying for your first credit card, you’re likely to have a limited or non-existent credit report. This can make you appear as a high-risk borrower as there is little or no evidence that you’ve responsibly borrowed money in the past.
Fortunately, there are still options open to you, but you might have less choice about the type of credit card you apply for.
Will I qualify for a credit card?
Credit card providers will have their own acceptance criteria, but in general they’ll take into account:
- Your age: Most providers will want you to be at least 18 to qualify
- Your income: Some credit cards will require you to earn at least a certain amount or be in full time employment
- Your finances: Any county court judgements or bankruptcies can put lenders off giving you credit
- Your credit report: Arguably the most important factor, lenders will always look at your credit report to determine your creditworthiness
However, you can also keep an eye on your credit report with MoneySuperMarket’s Credit Monitor.
Not knowing whether you’ll be accepted for a credit card can make it hard to know whether you should apply. With MoneySuperMarket’s eligibility checker you’ll be able to see what cards you’ll have a good chance of getting. To learn more about lenders’ acceptance criteria, have a look at our guide to whether you’ll be accepted for a credit card.
Before you apply for your first credit card
Before you apply for your first credit card, you should do as much as you can to give yourself the best chance of being accepted. This can include:
- Registering to vote: Signing up to the electoral roll provides proof of address, which can help improve your credit score
- Opening a bank account: Managing a current account can help you show your financial responsibility. You’ll be able to open direct debits, and if you always have money in your account to cover these payments it will demonstrate that you can be trusted to pay on time
- Paying bills on time: Building a history of bill repayments can also work as proof of financial responsibility, and may help indicate to lenders that you can be trusted to pay back credit
- Having a job and a regular income: Being able to prove you have regular income will improve your chances of being accepted
What can I use my first credit card for?
If you’ve decided to apply for your first credit card, it’s helpful to know the different types available so you can pick the right one for you.
Credit cards have a number of functions, with some more specialist than others. For example, a credit card might be used for:
- Spreading the cost of repayments without paying interest for a set period
- Booking a holiday with the confidence that your money is protected under section 75 of the Consumer Credit Act
- Consolidating debt without paying interest to give yourself time to pay it off
- Spending when travelling overseas without paying excessive fees
- Earning rewards points including airmiles and cashback
What is the best first credit card to have?
It will depend on why you need a credit card and whether you’ll be accepted. Here are four different types of card and why you might opt for them.
- Credit builder credit cards are designed for people with a poor or limited credit history – which could make them an ideal option for your first credit card.
As you spend and repay consistently you’ll slowly but steadily build up a credit file that should help prove you can be trusted to take out further credit.
Credit builder cards tend to come with higher than standard interest rates, but if you use them responsibly and repay what you owe each month then you won’t have to pay interest at all.
These cards also generally start with low credit limits, often somewhere between £100 and £200, but this goes up as you prove your ability to manage credit.
- Balance transfer cards allow you to transfer existing credit balances onto a new card – often with lower or zero interest – so you can better manage your debt and pay less in interest.
You should remember that interest free periods are rarely permanent, and when they end you may be placed on the lender’s standard variable rate – which can often be quite high.
- Purchase cards essentially let you borrow money for free or at a low rate to use for making purchases.
As with balance transfer cards, the interest free period is normally introductory, and when it finishes you’ll be placed on the lender’s standard variable.
- Reward cards offer incentives such as cashback, shopping points, or airmiles in return for using the card – however these cards can have higher interest rates and sometimes even monthly charges.
Things to consider when applying for your first credit card
Before you apply for your first credit card, you should consider the following:
The representative APR advertised by providers only has to be offered to 51% of successful applicants, which means the rate you see on a deal might not be the one you get. This is decided by your financial situation and credit history, and usually you’ll only be told what it is once you receive the card.
The credit limit you receive will also be decided by your financial situation and credit history, and in most cases you won’t know what it is until you receive your new card. However, you can ask your provider for a rough estimate, and they may also be able to tell you the maximum credit limit for new customers.
You may be able to ask for an increase in your credit limit, but it’s probably better to wait until you’ve built a good relationship with your provider first. If you have a history of missing payments or exceeding your current limit it’s unlikely they’ll agree to an increase.
Your provider may even offer to raise your credit limit after you’ve been using the card for a while, though you don’t have to accept this. If you think it might tempt you into spending too much, you may want to hold off and stay with your current limit.
Credit utilisation ratio
Your credit utilisation ratio is the amount of credit you’ve used in relation to how much is made available to you – essentially, how much of your credit limit you use up. Having a high credit utilisation ratio can hurt your credit report, so you’d ideally want to keep it at around 20-30%.
For example, if your credit limit is £1,000:
- Using up £500 or more – so 50% of your limit – could be seen as an indicator that you may be stretched financially
- Using up £200-£300 – so 20-30% of your limit – can be a sign that you don’t require huge amounts of credit, indicating that your finances are in good stead
Some credit cards, like purchase and balance transfer cards, offer appealing interest rates to bring new customers in. However, these interest rates don’t last forever – once the introductory APR period is over, you’re usually put onto the lender’s standard variable, which is often much higher. Find out more about how APRs work with our guide.
While it’s best to pay off your entire balance each month, if you can’t do this you should aim to pay at least the minimum monthly repayment amount. Missing your payments altogether can harm your credit score and could potentially end your low or 0% interest rate if you have one, as well as any benefits you might also be getting.
Fees and charges
If you miss any payments or exceed your credit limit, you might be faced with fees and charges as a result as well as damage to your credit report and lost benefits. Many credit cards will also have charges in place for cash withdrawals and using your card abroad.
How to apply for your first credit card
You’ll be able to apply for most credit cards online, through the phone, by post, or in person if the provider has a local branch. It’s often quicker and easier to apply online. However, if you want someone to talk you through the process then in-branch or phone applications may be the better option.
You’ll need to have the following information:
- Your full name
- Your address
- Your date of birth
- Your employment status
- Your income
Comparing credit cards
If you’ve decided to apply for a credit card, using MoneySuperMarket’s comparison service and eligibility checker is the best way to find the right deal for you.
All you need to do is tell us a little about yourself and your finances, including details about your income, employment status, and what you want to use the card for, and we’ll give you a list of options tailored to your needs.
Then you can sort through the offers and compare them by their interest rates, any included benefits, and how likely you are to be accepted if you apply. This way you can lower the risk of making an application that could potentially harm your credit score.
Once you’ve found the card you want, just click through to the provider to finalise your application. If it’s been accepted, your provider will send your card through the post with information about your interest rate and credit limit. All you’ll need to do is activate the card and it’ll be ready to use.
MoneySuperMarket is a credit broker not a lender. You must be 18 or over and a UK resident.