Navigating adulthood as a new college grad can be challenging. For one thing, working a full-time job can be an adjustment. And even if you lived in a dorm room or college house during your studies, it's not the same thing as being responsible for a home you rent (even if your parents have to guarantee your rent for you to end up with a place to live).
Another challenge you might face after graduating college is getting a credit card. And the reason is simple.
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Credit card companies don't let just anyone borrow. They vet all applicants by checking their credit scores.
But as a new college graduate, you may not have a credit score or borrowing history. If you've never had bills in your own name, there's no way to see how timely you've been with payments or how well you've managed your accounts. And so you may be denied a credit card by virtue of that.
Experian reports that an estimated 28 million Americans are credit invisible, while another 21 million are unscorable — meaning, they have some sort of bill-paying history, but not the type that can be used to calculate a credit score. And if you fall into a similar boat, there's one credit card you should apply for that you're more likely to get approved for.
It pays to get a secured credit card
With a traditional credit card, you're given a line of credit you can make charges against. With a secured credit card, you're given a spending limit, too, but that limit is secured by a deposit you put down when you open your account.
To put it another way, a secured credit card won't actually give you more buying power. That's because all you're really doing is taking your own money and putting it down as a deposit, which will serve as your spending limit on your new card. To put it another way, a secured credit card is sort of like a debit card in that you're basically limited to the funds you have in your checking account.
Now, you may be thinking, “Well, what's the point of getting a secured credit card then?” And the answer is that it can help you build credit so you're able to get a regular credit card in the future.
When you pay off your secured credit card in full and on time every month, that activity gets added to your credit record so you're slowly but surely building a credit history. And the more of a history you have of timely payments, the more your credit score can build on itself and improve. That could, in turn, make it possible for you to not only get a credit card that gives you a separate credit limit outside of a deposit you put down, but also, rent an apartment, finance a car purchase, and do the many other things adults tend to need to do.
An important move to make
If you're able to qualify for a regular credit card right out of college and are confident you'll be able to manage it well without landing in debt, then by all means, apply for one. If not, get yourself a secured credit card. It may not do much for your spending power, but it could do a world of good for your credit score.
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