Brenner answers questions about all aspects of family finance. ...
My son graduated from college this spring. He got a good job with a $72,000 salary at a consulting firm but has no credit history. Will that hurt his chance of getting a credit card? If his applications are rejected, will it damage his credit score?
Advise him to apply for just one card. He'll probably get it, thanks to his income. If not, one rejection won't hurt him.
If possible, he should apply for a MasterCard or Visa card at a credit union, where membership status will outweigh his lack of credit history. If he doesn't qualify to join a credit union through his former college or his job -- or through yours -- and his application at a bank is rejected, he can still get a "secured" card: He deposits money into an account that covers his unpaid card balances; if he pays them faithfully, he'll get a regular credit card in about a year.
His first card probably will have a $1,000 to $2,000 credit limit, says Greg McBride, an analyst at Bankrate.com, but that limit will soon be raised if he pays his bills on time. "Timely payments are the single biggest component of your credit score," says McBride. The runner-up: keeping your debts modest. Paradoxically, the less you use credit, the more you'll get. "If you use more than 30 percent of your available credit line, it starts to work against your credit score. Use under 10 percent, and it boosts your score." In other words, if your son's initial credit limit is $2,000, he should try to keep his monthly balance below $200, and never let it go above $600.
The bottom line Credit card issuers are intensely competitive. A young person with a job is a desirable customer, even if he doesn't yet have a credit history.
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