People can receive credit card offers at a young age. To determine if someone is eligible for credit accounts, a lender may conduct a soft credit check. If the lender decides it’s a good idea to offer credit accounts to someone, they will send an offer. This is a great opportunity for those who are yet to obtain their first credit card. It’s a good idea to build credit early in life. However, for some people this new credit account could have unintended consequences. Responsible credit is better than credit.
Here’s an example. A young man is offered a credit card online. He decides to apply online and waits to see what happens. He receives the approval within a matter of minutes. His credit card arrived in his mailbox a week later. He is excited and wants to try it out. He orders a burger at his favorite restaurant and then hands the waiter a note. He waits for the waiter to sign his name a few minutes later. Cool! He thinks. He has his first card, and it works.
Here’s what could happen. He is so thrilled about his new card, he even tries it out at other locations.
He also found a business suit that he had been eyeing but couldn’t afford. He purchased it. He was close to the $1,000 credit limit at the beginning of his tenure. He didn’t pay attention and charged items that increased his balance beyond the limit. His original credit card that got him his first card has been severely damaged.
As first-time home buyers prepare to purchase and finance their first home they need to be aware of how adding debt can reduce your chances of qualifying. A person with more debt may still be eligible for a loan. However, they will qualify for less. Lenders will be cautious when you apply for credit and use it. Lenders might hesitate to offer credit in the first instance.
If one of your children comes to you proudly boasting that they have their first credit card, counsel them.