What to consider before getting your first credit card
Getting your first credit card is an important decision, so it’s a good idea to think carefully before you apply. Here are some simple things to keep in mind:
1. Interest rates (APR)
The interest rate, or APR, is what you’ll pay if you don’t pay off your balance in full each month. If you carry a balance past its due date, you'll be charged interest. A lower interest rate means you’ll pay less.
Look for a card with a low interest rate, especially if you think you might not be able to pay off the full balance every month.
2. Fees
Alongside paying for interest, there can also be additional fees that you may incur. These include fees for late or missed payments, or extra costs for using your card when travelling abroad.
These fees can add up, making your credit card more expensive than you expected. Shop around to try and find a card with no or low fees, especially when you’re just starting out.
3. Credit limit
This is the maximum amount you can borrow on your card. A higher limit gives you more spending flexibility, but it can also tempt you to spend more than you can afford.
Start with a card that has a limit you can handle easily and use only a small part of it to build good credit.
4. Rewards and benefits
Some cards give you rewards like cashback, points, or travel miles when you spend. Rewards can be a nice bonus, but they shouldn’t be your main reason for getting a card.
Choose a card with benefits you’ll use, but don’t let that distract you from finding a card with good terms like low interest rates.
5. Your credit score and report
Your credit score is a number that reflects your credit report and indicates to lenders how well you’ve managed credit in the past. Both your score and report can play a part in whether you’ll be approved for a credit card and what terms you’ll get.
Before applying, check your credit score and report to understand where you stand. If it’s low, consider improving it first.
Eligibility checkers and soft searches
If you apply for a credit card, a ‘hard search’ will be conducted on your credit report – this leaves a temporary negative marker, so applying and being rejected for several in a short space of time can have a negative impact on your score.
But how do you know if you’ll be approved without applying? This is where an eligibility checker or a ‘soft search’ comes in.
Eligibility checkers only conduct a soft search, which lenders won’t be able to see and doesn’t affect your score.
An eligibility checker can help you to:
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find financial products that you’re eligible for
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reduce the number of applications you make
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decrease the risk of rejection.
What will a credit card provider look for?
Common factors a lender will check include:
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verifying your identity
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your credit history (this includes store cards and overdrafts)
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your income and if you can afford repayments
Your identity
When you check your credit history, make sure your personal details are up to date. This includes your:
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name
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address
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any financial links you have – such as a current or ex-partner
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your electoral roll status.
This is essential to do across different credit reference agencies. If there are discrepancies between them, it could affect your credit history.
Being on the electoral roll helps the lender verify your identity and eliminate the risk of fraud, and it only takes minutes to do. You can register to vote on the government's website.
Your credit history
Your credit history is important when it comes to making applications for any kind of credit. You can check yours by looking at your credit report with any three of the main credit reference agencies (Experian, Equifax or TransUnion). You can also see your Equifax credit report free through our member-only platform, CredAbility.
Someone who has no history of borrowing may find it more difficult to be approved for a credit card. This is because the lender has no reference for how you manage your money and if you would be reliable when it comes to repaying. If this is the case for you, you should look at credit cards that are designed for people with thin or bad credit.
By checking your credit history, lenders will be able to see your financial behaviour. This includes things such as:
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If you’ve missed any repayments on any credit agreements, like a phone bill
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If you’re in or have been in your overdraft for a long time
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If you’ve been part of a financial dispute
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Any CCJs or IVAs (these only come off your record after 6 years)
Your income
If you have a consistent income and have done for a while, this will make lenders more comfortable when lending to you.
However, if you have no source of income or it’s inconsistent, then it can make lenders nervous about lending to you. This is because your income will seem less secure.
If you’ve changed jobs a lot, then this can also put lenders off. If you've just started at a new job, it could be worth waiting a couple of months before you apply for a credit card.
Do I need a credit builder credit card?
If you have a thin credit history, then a credit builder card could be an option. These are designed for people with either a low credit score or little-to-no credit history.
These cards usually come with a higher interest rate and lower spending limit than most, but they can help you build up a better credit score over time when used responsibly.
You’ll need to keep up with the repayments and stay within your limit to help improve your score. Not doing so could harm it. Once you’ve built up your credit rating, you’ll be eligible for a wider range of products.
What if my application is rejected?
It can be very frustrating to submit a credit card application only for it to get rejected. While this is disappointing, you should avoid making lots of applications for different cards within a short space of time – because of the negative impact on your credit score.
Using an eligibility checker before you apply for another product will reduce the risk of rejection. It’ll show you how likely you are to be accepted, without affecting your credit score. While there are plenty of advantages to getting a credit card, take your time and try to consider the above before you submit an actual application.
Remember, there are different cards for different circumstances, so do some research online to see which might be right for you.
Ocean Credit Card
See if it's a YES before you apply
- Up to £1,500 credit limit
- Checking won't affect your credit score
- Get a response in 60 seconds
39.9% APR
Representative (variable)
Intelligent Lending Ltd (credit broker). Capital One is the exclusive lender.
Disclaimer: All information and links are correct at the time of publishing.
Fiona Peake
Personal Finance Writer
Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.
