These days, having a good credit score is not just a recommendation, it’s a requirement. Let’s be honest, having a good credit score increases your opportunities. A high credit score can help you rent a nicer apartment or make a down payment on a new car. Having a good credit score also helps you when applying for a loan.
So what do you do if you have no credit history at all? Can you qualify for any kind of credit card? Young people, students, immigrants and those afraid of debt often wonder how they can get a credit card if they have no credit history.
Luckily, there is a way for people with no credit history to apply for and be approved for a credit card. It is possible. It takes a little effort, but the benefits of being approved are not limited to that. In fact, some credit cards are designed for people like you. However, as a result, some of them require collateral.
There’s no need to shy away from the idea of making a down payment to get a credit card. It’s possible to get a credit card even if you have no credit history. Let’s see how to do it.
Can I get a credit card even if I have no credit?
Getting your first credit card may be one of the most important steps in building a strong credit history. But can you get approved for a credit card if you don’t have a strong credit history to generate a credit score? The short answer is yes, but you may be limited in the types of credit cards you can be approved for.
If you’re thinking about opening your first line of credit, building credit can seem nearly impossible. That’s because most credit card issuers look for consumers with an established credit history to get a sense of your creditworthiness. Credit scores are designed to help lenders determine whether you’re responsible for the loan you’re taking on.
But no credit history is not the same as a bad credit score. A bad credit score tells lenders that you’ve abused credit in the past. Perhaps you missed multiple payments and found yourself with mountains of credit card debt. Consumers with no credit history just don’t have enough data to calculate a credit score.
Your credit score will greatly affect the type of credit card you can use, but with this in mind, you do have options. Credit cards for consumers with low credit scores or no credit history at all include:
- Student Credit Cards: Student credit cards are a great way to take the right steps toward building credit and developing solid financial habits. Student credit cards are designed for students who have never had a credit card before, and they often come with notable perks, like student offers and no annual fees.
- Secured Credit Cards: A secured credit card gives you access to a small line of credit in exchange for a one-time security deposit. The credit limit is usually equal to the amount of the deposit.
What to look for in your first credit card
When searching for cards for first-time applicants, your options may be limited, but building credit isn’t a race to win. It’s important to use your first credit card as an opportunity to develop healthy financial habits so you can eventually move on to credit cards with more perks and rewards.
When weighing the pros and cons, there are a few features to look out for.
Annual Fee
There are plenty of student credit cards with no annual fees and secured credit cards available, so keep this in mind as you evaluate your options. You don’t want a high annual fee on your first credit card.
For example, the Capital One Platinum Secured Credit Card has no annual fee, while the OpenSky® Secured Visa® Credit Card has a $35 annual fee. While this may not be a huge amount to pay once a year, it’s good to know that you have options.
Foreign Transaction Fee
As well as annual fees, you should also be wary of cards that charge foreign transaction fees.
If you’re a student looking for your first credit card, Discover it® Student Cash Back with no foreign transaction fees is the best option to keep in mind. If you’re planning on studying abroad or traveling across the ocean over spring break, you won’t have to worry about extra charges when using your credit card overseas.
High Interest Rates
Credit cards for people with bad credit (or poor credit) usually come with much higher interest rates, which may be unavoidable. However, if you can pay your bill in full and on time each month, you won’t have to pay interest.
If you don’t mind giving up some perks, the Chime Credit Builder Secured Visa® Credit Card doesn’t charge interest and has no late fees or over-limit penalties.
How to get a card with no credit history
The first step to getting a credit card with no credit history is to make sure that the option you want to apply for is made for people with no credit history. For example, Bankrate has a list of the best credit cards for people with no credit history for those with no credit score.
You can also find out if you qualify for a credit card without a hard credit check. Tools like Bankrate’s CardMatch can help you search for cards and provide information about your chances of approval. Overall, this can help you avoid getting your credit card application rejected.
Once you’ve applied for a credit card and been approved, be sure to check your credit report for errors. You can check it for free once a week at AnnualCreditReport.com.
How to build credit with your first credit card
If you’re wondering if your credit score starts at zero, you’re not alone. But the truth is, there’s no such thing as a “starting credit score.” When you’re new to credit, your credit score simply builds based on how you use credit. Your credit score starts building when you open your first credit card.
The key to building a strong credit score is to pay your bills in full and on time every time, but there are some ways you can further improve your credit score to help you qualify for better credit cards in the future.
Becoming an Authorized User
When you become an authorized user, you are added to the credit card account of an existing cardholder (usually a family member or friend). The primary cardholder simply adds you as an authorized user and gets their own credit card in your name. The primary cardholder is responsible for making all payments and is liable for payment. Your account and payment history will be reported to the credit bureaus and will be reflected in your newly created credit report.
Use your cards wisely
This may seem like a no-brainer, but the best way to improve your credit score is to develop healthy habits right from the start. Paying your bills on time will improve your credit score. If you’re 30 days late with a payment, it will be reported to the credit bureaus and your credit score will drop.
Limit authorisation holds
Every time you apply for a credit card, a hard query will appear on your credit report. When you apply for a credit card, the lender will run a hard credit query, temporarily lowering your credit score by a few points. With this in mind, don’t go ahead and apply for every credit card on the market. Research which credit cards work best for you and apply for one at a time as a best practice.
Be mindful of your credit utilization ratio
Your credit utilization ratio tells you how much of your available credit you’re using. This amount is expressed as a percentage and makes up 30 percent of your credit score. The lower this number, the higher your credit score. Once you start using your first credit card, check out Bankrate’s credit utilization calculator to find out your ratio.
Conclusion
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 remember that it comes with patience and solid financial habits. If you can commit to the long-term strategy of making payments on time and keeping your credit utilization ratio within a healthy range, you’ll be able to move from a secured credit card to an unsecured one in no time.
