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"Credit cards are the most attainable of all forms of credit," financial expert John Ulzheimer, formerly of FICO and Equifax, tells Select. Even if your credit score is on the lower end, there's likely a credit card option out there for you.
On the other hand, in order to get approved for a mortgage (a form of installment credit) you need a good credit score, a sizable down payment and proof of employment — and the application process is fairly vigorous. But credit cards (the most common form of revolving credit) come designed for all different purposes and credit scores no matter what type of borrower you are.
But Ulzheimer gives a word of warning: Since lenders issue cards to people with all kinds of credit scores, they charge every consumer higher interest rates compared to most installment loans and revolving accounts.
This helps to reduce the lender's risk when issuing a credit card to someone with lower credit. But it also increases the cost for anyone who carries a balance even if you have good credit, says Ulzheimer. That's why it's important to know not only how to qualify for a new credit card — but also how to use a card wisely.
Before you sign up for a credit card, make sure you have a clear plan for how you're going to use it.
Qualifying for a new credit card is a good first step to building credit, but how much it can improve your score depends on how you use it.
"Credit cards are practically the only form of credit where interest is optional," Ulzheimer says. "Unless you carry a balance, you'll never pay interest."
Don't charge more than you can afford to pay off when the credit card bill comes because revolving balances easily rack up interest with each day that passes.
Borrowers with good or excellent credit have better approval odds for the best credit cards than borrowers with less-than-stellar credit. But there are cards for those at every stage along the credit journey — even if you have no credit history at all.
For beginners, secured credit cards don't require a high credit score to qualify, but you will likely need to pay a security deposit upfront (usually $200) that acts as your credit limit. Some cards to consider are the Capital One Platinum Secured Credit Card for a low deposit, the DCU Visa® Platinum Secured Credit Card for a low variable APR (if you carry a balance, which we don't recommend) and the OpenSky® Secured Visa® Credit Card for no credit check when you apply.
As you build credit, you can graduate to an unsecured credit card, which is a traditional credit card. The Capital One QuicksilverOne Cash Rewards Credit Card has a cash-back rewards program and the no-fee Capital One Platinum Credit Card comes with some travel benefits.
After you have proven to be a promising borrower on your first unsecured card — making on-time payments and keeping a low credit utilization rate — you can consider applying for a rewards credit card that requires a better credit score but comes with more perks. One of our favorites is the Capital One Venture Rewards Credit Card for travel.
Finally, for those with excellent credit, there is a wide selection of premium cards, such as the American Express® Gold Card for frequent traveling, the Citi® Double Cash Card for cash back and both the Chase Sapphire Preferred® Card and Chase Sapphire Reserve® for generous sign-up bonuses and luxury perks. Note that, unlike typical credit cards, the Gold Card allows you to carry a balance for certain charges, but not all.
With a wide variety of credit cards out there designed for every type of credit risk, it's a good idea to take advantage of whichever one you can qualify for. Building credit and improving your credit score will certainly help you on your financial journey, especially as you apply for things like a first-time mortgage or a new car loan.
Make sure you are purposeful about how you use your credit card so that it benefits you rather than costs you. Always spend within your means and always pay your bills on and in full, if you can.
Information about the Capital One cards and DCU Visa® Platinum Secured Credit Card has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
Click here to view the Cardholder Agreement for the OpenSky® Secured Visa® Credit Card.