How to Get a Credit Card With No Credit History

Learn How to Get a Credit Card With No Credit History.

Puzzling out how to get a credit card with no credit history can seem like the impossible dream. Many credit card companies have tightened their underwriting standards and establishing a credit score requires that you have a credit account that has been active for six months or longer. Without a credit score, getting approved for your first credit card can seem challenging, but there are some solutions.

The new credit customers of today are the loyal customers of tomorrow and credit card companies want your business. They also have a responsibility to manage risk. To address this challenge and earn your business, some credit card companies now offer credit cards specifically for people with little or no credit. These credit cards can be a good way to start building your credit history.

Before you apply for your first credit card, be sure you have stable employment. The credit card issuer will need to verify that you make enough money to pay your credit card bill. To qualify without a co-signer or spouse, the income listed on your application must be only your income. If your income is high, you have a better chance of being approved and a greater likelihood of a larger starting credit line.

Pre-Qualify for a Credit Card Online

Some credit card companies offer an online tool that allows you to check whether they offer a credit card for customers with little or no credit history. Pre-qualifying is different part of the process than applying for credit. When you’re only pre-qualifying, credit card providers will check your credit history. However, when pre-qualifying for credit, the credit inquiry is what’s called a soft hit on your credit report, or a soft pull. A soft credit hit isn’t a request for credit. Because there is no request for new credit yet, the inquiry will not affect your credit score. If you later choose to apply, the application process creates a hard inquiry on your credit report. This means that you can shop your options, and your credit won’t be affected until you apply for a credit card. If you’re on the the credit card website, read the page carefully and be certain you aren’t applying when you only want to pre-qualify.

Credit Union Credit Cards

If you or a family member are a member of a credit union, your credit union can often be a good place to start your credit history. Your credit union may offer a small credit line to start, and increase your credit limit as you prove your credit worthiness. A $500 starter line isn’t uncommon.

Less Credit is Safer to Start

Starting with a lower amount of available credit protects both you and the credit card issuer from larger risks. It’s easy for people who are new to managing their credit to become overextended, so starting out smaller is a healthy first step toward establishing your credit history. If you’re offered a lower credit limit, this may be a blessing in disguise. The last thing you want to do is get in over your head when you’re building your credit history.

Store Credit Cards

Another answer to the question of how to get a credit card with no credit history is store credit cards. Retail store credit cards are among the easiest credit cards to get. The obvious downside is that they can only be used at that retail store. Store credit cards also tend to have low starting credit limits and higher interest rates.

One successful strategy for using store credit cards to build your credit history is to make small purchases that you know you can pay off within one or two payments. This strategy also prevents you from accruing large interest costs. Carrying a larger balance or making minimum payments on a store credit card will cost much more in interest charges in the long run.

Student Credit Cards

Some credit card companies now also offer credit cards specifically for students. You’ll need to prove that you are a college or university student. Usually, a college acceptance letter will be acceptable proof, but the credit card issuer will advise you in regard to the information they need to underwrite your credit application.

Make sure you understand the interest rate and fees before applying or accepting a student credit card. These cards can have higher interest rates than some other credit card options. Fees for student credit cards can put a dent in your monthly budget or affect your ability to make payments so read the fine print.

Secured Credit Cards

If you don’t qualify or aren’t approved for a standard credit card, a secured credit card is another option. Standard credit cards are unsecured, which means if you default on payment, the credit card company has no guarantee it will ever recover its money. Standard credit cards aren’t like home loans or auto loans where there is an asset that can be repossessed if the debt is in default.

A secured credit card works differently than a standard unsecured credit card. A secured credit card requires that you make a deposit to secure part of the credit limit granted. This requirement reduces risk of non-payment.

Many secured credit cards have expensive fees. Shop around. The fee structure may be much better with some secured credit cards than with others. Excessive fees eat into tight budgets and can affect the amount of spare cash you have available to make payments.

Be sure that the secured credit card provider reports to the major credit bureaus. If your credit history with your secured credit card provider isn’t available through the major credit bureaus, that particular secured credit card isn’t useful for building your credit history.

[bctt tweet=”Should You Get a Credit Card Co-signer?” username=”theversawriter”]

Similar to when qualifying for auto loans, you may have the option to get a co-signer to help you qualify for your credit card. In getting a co-signer, that person helps you to qualify for a credit card because they have established good credit. However, your payment performance can affect your co-signer’s credit. If you default on payment, your co-signer is equally responsible for the debt balance.

Because the unexpected sometimes happens, including surprise bills, reduced income or lost jobs that can affect your ability to make on-time payments, it may be better to pursue other options before obtaining a co-signer for a credit card. A little bad luck or a temporary setback can affect others negatively and leave everyone with regrets.

Beware of High Credit Utilization

Whether you’re just getting started with building your credit history or you’ve already established some credit history, credit utilization should be a strong consideration. A first credit card will probably have a relatively small credit limit, which makes it easier to use all or most of the credit available with just a few purchases.

When you’re trying to build your credit history, a higher credit utilization can work against you. It’s best to start with small purchases that won’t use most of your credit line or exceed your credit limit. Smaller purchases are easier to pay in full within one or two payments and will cost less in interest charges.

Even when you are further along with building your credit history, try to keep your balances well below your credit limit. Utilizing a greater percentage of your credit limit or exceeding your credit limit can hurt your credit scores or result in expensive over-limit fees.

Prepaid Credit Cards

Prepaid credit cards are readily available, but a prepaid credit card won’t help you build your credit history. You can think of a prepaid credit card as a convenience that allows you to make payments if you don’t have a checking account or if cash isn’t accepted buy a particular vendor or store.

Now you know how to get a credit card with no credit history. As you can see, there are a number of ways to get started with building your credit history and getting your first credit card when you don’t have a credit score yet.

Once you get your first credit card, establishing good credit comes with responsibility and requires self-discipline.

Always make payments on time and always pay more than the minimum amount due. Keep your balance safely below your credit line so that your credit utilization won’t hurt your credit score.

Establishing good credit now can affect you for many years to come and in ways you might not realize. Your credit score can affect your ability to get car loans, home loans, and school loans. Building good credit will earn you better interest rates, access to more credit when needed, and can even save you money on things like your insurance.

Default image
Eric Huffman

Eric is a Freelance Personal Finance Writer licensed in Property, Casualty, and Life Insurance.

With over a decade of experience writing on insurance and personal finance topics, as well as need-based consulting, he brings real-world knowledge to these important topics.

Articles: 22