Olivia Mittak opened her first credit card, the Petal 2 Visa, shortly after graduating from college. Her credit score then was in the 600s. Years later, that one decision had her flying to Germany for 10 days without paying a dollar for any of the 10 hotel nights.
Mittak, a credit cards editor at The Points Guy, has since collected nine cards and uses the points to travel: Germany, Christmas in Canada, and a growing list of U.S. states toward her goal of visiting all 50. A trip to Mexico is next. None of it was quick. She says it took several years of responsible use on that first card before she qualified for the travel rewards cards that now fund the trips.
Why the score matters
Her pitch to new graduates is that credit scores are dull but important. A high one can decide whether you get a favorable car loan rate, a first travel rewards card, or approval for an apartment.
Student loans or a parent’s authorized-user status may already have given a graduate some history, she notes, though the score is probably not high. Credit bureaus also tend to look more kindly on many accounts in good standing than on one or two, and the average age of accounts counts. Starting early helps. Do the “boring work” now, she writes, and you can have a score high enough in your mid-to-late 20s to be approved for the better rewards cards.
Issuers often prefer an existing relationship for higher-end cards. A starter card can build one. After a year of responsible use, Chase automatically considers cardholders for an upgrade to the Chase Freedom Unlimited.
Picking a first card
Mittak recommends a card from an established bank such as Capital One, Chase or Citi over a startup. Hers came from a startup, and she says it was a bad choice.
For people building credit from nothing, there are cards designed for new borrowers. A secured card asks for a deposit, generally $200 or more, which becomes the credit line. Approval is never guaranteed, even for those. Issuers look past the credit report to income and housing payments. Someone searching for work or working part-time should wait for a full-time job, she advises, because issuers hesitate to lend to people with very limited income unless they hold significant savings.
When the balance can’t be paid in full
She urges paying the statement balance in full every month. Life gets in the way, though. Many cards offer 0% APR for a set stretch, which can run from 12 to 21 months. Whatever remains afterward is charged at the regular rate, so a repayment plan matters. She considers that better than many buy now, pay later services, since the card builds credit history and carries purchase and fraud protections. Some issuers, Chase’s Pay Over Time among them, offer installment plans with a fixed monthly fee that is far cheaper than the interest.
