Preparing to get your first credit card: Dos and don’ts

by Stephen Magagnini, Word In Black

 Credit, to a great extent, makes the adult world go ‘round.

 Wells Fargo executive Raphael Henderson shared his insights on using a credit card responsibly.

 Henderson, Vice President and Foothill Corridor Regional Banking District Manager for the Inland Empire Region, has enjoyed a 32-year career in banking. His broad professional experience includes developing business solutions and advising public and private sectors on how to build and sustain mutually beneficial long-term relationships that focus on improving the quality of life for residents and communities.

 WIB: What was your first foray into the credit world?

 Henderson: I was born in San Diego, California. When I was a sophomore in high school, I had a job working at Lohman’s clothing store and they were accepting credit cards. I frequently worked in the back office helping them with their collection efforts on checks, and we would often take a credit card payment in lieu of a check.

 At the time, I recognized how the adverse utilization and misappropriation of credit could have a negative impact on one’s finances. Even then as a young sophomore I understood the importance of using credit cards responsibly and maintaining a healthy credit profile.

 WIB: When did you get your first credit card?

 Henderson: While I started receiving credit card offers when I went to college at USC, I didn’t get my first credit card until I had been working for several years and started traveling for work. That is when I felt I had a need for a credit card, so I got my first Mastercard, which I had for several years.

 WIB: What do people need to know before getting their first card?

 Henderson: It’s important to recognize that credit is essential, and using it responsibly is key to building and maintaining a healthy credit profile. Your credit profile and score can help determine a lot, including employment opportunities, living arrangements, hotel and car rentals—it’s important you look at it from a lifestyle perspective.

 Before you get a credit card, the first question you should ask yourself is, can I pay it back? Take care to establish a realistic budget that you can stick to and make sure you understand the full implications of delinquency and what may happen if you fail to pay it back in a timely manner.

 In addition, take the time to fully understand your interest rate, and learn if your card provides rewards on certain purchases, such as gas, restaurants, or travel.

 WIB: What credit rules do you follow in your own family?

 Henderson: I have two sons who are in college. While they don’t have credit cards yet, we talk a lot about financial literacy in our home so they will be well-informed about how to manage credit responsibly by the time their need to get a credit card arises.

 WIB: What happens when you fail to pay off your credit cards or interest?

 Henderson: Failing to pay your credit card on time can lead to a delinquent account, which more than likely impacts your credit profile and score. You should always strive to pay the balance in full every month. If paying in full isn’t possible one month, be sure to make at least the minimum payment on time. This is a best practice that will go a long way in building and maintaining a healthy credit profile that will serve you for years to come.

 It’s important to remember that help is available. Banks and lending institutions have a tremendous amount of resources to help you establish and maintain credit.

  • What’s the best time to get your first credit account?

 o Before applying for your first credit card, you will want to be confident that you will be able to afford any charges you make and handle your credit responsibly. This means that you won’t charge more than you can afford to pay and will remember to pay your bill on time each and every month.

  • Understanding the basic requirements for credit:

 o Credit providers are governed by specific federal laws when it comes to granting credit. It can be challenging to get your first credit account if you are under 21 and don’t have a steady income. Federal law requires anyone under 21 years old to have verifiable income from a job to be approved for credit. You also may choose to report child support or government sourced income on a credit application.

  • Key steps to building credit:

 o To build a healthy credit history, you first must know which activities impact your credit score and report. A credit report is a record of your credit activity and how responsibly you’ve paid your credit accounts over time.

 o Having a checking or savings account helps the bank know you and how you manage your accounts. This can be helpful when applying for your first credit account.

 o Learn more about credit scores

 o Explore more resources about building a solid credit history.

 o View my FICO Credit Score

 o Understanding the difference between credit scores

 o Good credit habits

 (Wells Fargo Bank, N.A. is a member of the Federal Deposit Insurance Corporation.)

  (The Financial Journey is a unique series focused on financial education and opportunities. These stories have been created through a strategic partnership between Wells Fargo and Word In Black.)

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