These days, having good credit is less of a suggestion than a mandate. Let’s face it, when you have good credit, you have more opportunities. You can rent a nicer apartment and put a down payment on a new car. Having good credit is also useful when you need to apply for a loan.
So what do you do when you have no credit history? Do you qualify for any type of credit card? Young people, students, immigrants and anyone afraid of the notion of debt wonders how they can get a credit card without a credit history.
Fortunately, there are ways to get a credit card without credit. It’s possible, and while it may take some work, the benefits go far beyond approval. In fact, some credit cards are designed for this type of people. However, some require collateral accordingly.
However, the thought of putting down a deposit to get a credit card shouldn’t have you running for the hills. Getting a credit card with no credit history is more than possible. Let’s see how.
Can you get a credit card if you have no credit?
Getting your first credit card can be one of the most important steps towards establishing a strong credit history. But if you don’t have enough established credit history to generate a credit score, can you get approved for a credit card? The short answer is yes, but you are limited in the types of credit cards you can get approved for.
Building credit can seem nearly impossible if you’re considering opening your first line of credit. This is because most credit card issuers look for consumers who have an established credit history in order to capture their creditworthiness. A credit score tells lenders whether you are responsible or not.
However, having no credit history is different from having a bad credit score. A bad credit score tells lenders that you have abused your credit in the past. Maybe you’ve missed several consecutive payments and now find yourself with a mountain of credit card debt. Consumers without a credit history simply don’t have enough data to calculate a credit score.
Your credit score heavily influences the types of credit cards you qualify for, but with that in mind, you have options. There are credit cards aimed at consumers who have low credit scores or no credit history, such as the following:
- Student Credit Cards: A student credit card is a great way to build credit while taking the right steps to build strong financial habits. Student credit cards are designed for students who have never had a credit card before. They often come with notable perks, such as student-centric rewards and no annual fees.
- Secured credit cards: Secured credit cards give you access to a small line of credit in exchange for a one-time security deposit. Your credit limit is usually equal to your security deposit.
Features To Look For In Your First Credit Card
Your options may be limited when looking for your first credit card, but building up credit with your first line of credit isn’t a race you have to win. It’s important to use your first credit card as an opportunity to build healthy financial habits, so you can eventually upgrade to a credit card that may have more benefits and rewards.
As you compare the pros and cons, here are a few features to look out for.
There are plenty of student credit cards and secured credit cards with no annual fee, so keep that in mind when browsing through your options. The last thing you want is for your first credit card to come with a hefty annual fee. For example, the Capital One Platinum Secured Credit Card has no annual fee, but the OpenSky® Secured Visa® Credit Card has an annual fee of $35. While that’s not a lot to pay once a year, know that you have options.
Foreign transaction fees
Much like the annual fee, you want to keep an eye out for any cards that have foreign transaction fees. A top choice to keep in mind if you’re a student looking for a beginner’s credit card is the Discover it® Student Cash Back Credit Card given the lack of foreign transaction fees. If you’re planning to study abroad or take a trip across the pond for spring break, you won’t have to worry about extra charges when using your credit card abroad. international.
High interest rates
Credit cards for people with no credit (or with poor credit) usually come with much higher interest rates. This may be unavoidable, however, if you manage to pay your bill in full and on time each month, you won’t have to pay interest. The Petal® 2 “Cash Back, No Fee” Visa® credit card offers great options for people looking to grow their credit while earning cash back.
The Visa Petal 2 “Cash Back, No Fees” credit card offers 1% cash back on qualifying purchases or up to 1.5% on qualifying purchases after making 12 monthly payments on time. What is particularly remarkable? The card’s APR varies from 12.99% to 26.99%, making it a solid option for a low-interest starter credit card.
Ways to improve your credit score
It’s not off the beaten track to ask if your credit score is starting at zero. But the truth is that there is no “starting credit score”. When you’re new to credit, you build your credit score simply based on how you choose to use it. When you open your first credit card, you begin to build your credit score.
The key to building a solid credit score is paying your bills on time and in full every time. But there are several steps you can take to increase it even more to qualify for better credit cards down the line.
- Become an authorized user. When you are an authorized user, you are added to an existing cardholder’s credit card account, usually that of a family member or friend. The primary cardholder simply adds you as an authorized user and you get your own credit card with your name on it. The primary cardholder is responsible for all payments, which makes them liable. The account and payment history will be reported to the credit bureaus, populating your newly created credit reports.
- Use your card wisely. It should be obvious, but the best way to improve your credit score is to start healthy habits early on. When you pay your bills on time, you increase your credit score. If you are 30 days late on a payment, it will be reported to the credit bureaus and your credit score will suffer.
- Limit credit requests. A serious inquiry appears on your credit report every time you apply for a credit card. When you apply for a credit card, the lender will do a thorough credit check, which will temporarily lower your credit score by a few points. With that in mind, don’t go on a credit binge and ask for every credit card out there. Do your research to determine which credit card is best for you and ask for one at a time as best practice.
- Keep an eye on your credit utilization rate. Your credit utilization rate measures how much of your available credit you are using. This amount is expressed as a percentage and represents 30% of your credit score. The lower this number, the better it is for your credit score. Once you’ve started with your first credit card, check out our credit utilization calculator to determine what your ratio is.
The bottom line
A high credit score will make your life easier in the long run, especially when you want to apply for a loan or a better credit card, but keep in mind that it comes with patience and strong financial habits. If you can commit to a long-term strategy to make payments on time and keep your credit utilization rate in a healthy range, you’ll be well on your way to switching from your secured credit card to a credit card. unsecured in no time. .