Know What You Need: Check Your Credit Report to Determine the Right Credit Card for You

How you use your credit cards can impact your credit report and credit scores. When selecting your next credit card, find one that best matches your needs and financial goals.

Your credit report is an excellent place to review and understand your past and present credit patterns including number of credit lines open, frequency of payments, and credit utilization ratios.

Pay attention to your spending (and paying) habits

Do you carry a balance on your credit card each month or do you pay it off in full each month? Do you want to buy everything on your credit card or do you want to save it only for emergencies?

How you use and pay off your credit cards should play a role in selecting your next card. How frequently you pay down your credit debt is an integral part of your credit reporting, which subsequently impacts your scores.

Here are some scenarios to consider prior to signing up for that next credit card:

Pay your bill in full each month: Don't focus on interest rates, but rather consider looking for a card with a nominal (or no) annual fee and longer grace periods.
Carry a balance: You may want to look for a card with a low introductory interest that does not rise too high after the intro period.
Use the card for most purchases: Consider a card with a high credit limit and a rewards program that meets your needs (see section below for incentives and rewards).
Only use the card for emergencies: Try looking for a credit card with low interest rates and fees - don't worry about the frills and rewards.

Consider transfer offers, but be wary of fees

If you are carrying a balance on a high interest rate card, consider transferring it to a card with a lower interest rate. Many credit cards offer very low introductory interest rates if you transfer a balance. Transferring a balance with a higher rate to a card with zero interest will allow you to pay down your debt faster and increase your debt-to-credit ratio. This can reflect positively in your credit reporting and scores.

Are fees worth incentives and rewards?

Reward cards and incentive programs are popular with people who want to get "rewarded" for using their cards. These rewards and incentives may include:

Cash back
Airline miles
Hotel points
Gas credits
General rewards/points
Discounts towards future purchases

Many reward cards have an annual fee. If you are going to use the card often and actually accrue rewards, then the annual fee may be worth the bonuses you receive. Be sure to check the credit card terms and conditions with regard to specifics about the program.

What if I have a poor credit history?

If you have a poor credit history, you may have trouble qualifying for a standard credit card. Your credit report will reflect your history including timeliness of payments, debt-to-credit ratios, and overall credit utilization. Having no established credit could be just as difficult as having a troubled credit history.

You still have options to get a card, however, whether you have a poor credit history or no history at all. The two main options include:

Secured credit card: These cards require collateral (typically a deposit) and may have extra fees, but they are an option if your credit history is lacking or poor.
Pre-paid credit card: Not an actual credit card, these cards allow you to preload money onto the card. You can use these cards like a credit card, but you are limited to the amount on the card that you've preloaded.

Importance of your credit line

When opening a new credit card account, consider monitoring your credit line. If you are planning to use your card for a high degree of purchases each month, be sure your credit line can accommodate this without maxing out your card. Bumping into credit limits and opening new lines of credit more frequently can reflect poorly in your credit report and scores.

Know your credit report so you can select the right card for you

Before applying for a new credit card, know your credit information and history. Be sure to check your credit report based on information from Experian, TransUnion and Equifax (the 3 primary credit bureaus).This will give you a better idea of whether you may qualify for a particular card or credit offer.

Checking your credit report will give you a solid understanding of your credit history. This will help you determine your previous spending and payment patterns, and decide what type of credit card offers are right for you.