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How to get a credit card with no credit history

July 10, 2023

Janna Herron | Bankrate (TNS)

These days, having good credit is less of a suggestion and more of a mandate. Let’s face it, when you have good credit, you have more opportunities. You can lease a nicer apartment and put a downpayment on a new car. Having good credit also comes in handy when you need to apply for a loan.

So, what do you do when you have no credit history whatsoever? Do you qualify for any type of credit card? Younger people, students, immigrants and anyone afraid of the notion of debt are left wondering how they can get a credit card with no credit history.

Luckily, there are ways you can get a credit card with no credit. It is possible, and while it might take some work, the benefits go well beyond getting approved. In fact, some credit cards are designed with this type of individual in mind. However, some require collateral as a result.

The idea of putting down a deposit in order to get a credit card shouldn’t cause you to run for the hills. Getting a credit card with no credit history is more than possible. Let’s take a look at how.

Can you get a credit card if you have no credit?

Getting your first credit card may be one of the most important steps toward building a strong credit history. But if you don’t have enough of an 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 next to impossible if you are contemplating 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 grasp their creditworthiness. A credit score tells lenders whether or not you are responsible.

However, having no credit history is different from having a bad credit score. A bad credit score tells lenders you’ve misused credit in the past. Perhaps you missed multiple payments in a row and now you have found yourself with a mountain of credit card debt. Consumers who do not have 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 are eligible for, but with this in mind, you do have options. There are credit cards geared toward consumers who have low credit scores or no credit history at all, such as the following:

— Student credit cards: A student credit card is an excellent way to build credit while taking the right steps towards learning solid financial habits. Student credit cards are designed for students who haven’t had a credit card before. They often come with noteworthy 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 out for in your first credit card

Your options may be limited when browsing for your first credit card, but building credit with your first line of credit isn’t a race you need to win. It is important to use your first credit card as an opportunity to adopt healthy financial habits so you can eventually graduate to a credit card that may have more perks and rewards.

As you compare the pros and cons, here are a few features to keep an eye on.

Annual fees

There are plenty of student credit cards and secured credit cards without annual fees, so keep this in mind while browsing through your options. The last thing you want is your first credit card to come with a steep annual fee. For example, the Capital One Platinum Secured Credit Card does not have an annual fee, but the OpenSky® Secured Visa® Credit Card comes with a $35 annual fee. While that may not be a lot to pay once a year, know that you have options.

Foreign transaction fees

Much like annual fees, you want to keep an eye out for any cards that come with foreign transaction fees. A top choice to keep in mind if you are a student looking for a starter credit card is the Discover it® Student Cash Back, given the lack of foreign transaction fees. If you are planning on studying abroad or taking a trip across the pond for spring break, you won’t have to worry about any additional charges while using your credit card internationally.

High interest rates

Credit cards for individuals with no credit (or poor credit) typically 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. If you’re willing to forgo rewards, the Secured Chime® Credit Builder Visa® doesn’t charge interest whatsoever, and it also doesn’t charge late payment fees or have over-the-limit penalties.

How to get a card with no credit history

The first step in getting a credit card with no credit history is to ensure the options you’re interested in applying for are built for people with no credit history. For example, Bankrate has a list of the best credit cards for no credit history that are geared toward those with no credit score.

You can also check to see if you can prequalify for a credit card with no hard credit check. Tools like Bankrate’s CardMatch can help you find a card and offer information on your chances of approval. Overall, this can help ensure your credit card application isn’t denied by applying for a card for you have a high chance of qualifying for.

After applying for and being approved for a credit card, be sure to monitor your credit reports for errors. You can do so once a week for free through AnnualCreditReport.com.

How to use your first credit card to build credit

It isn’t outside the box to wonder if your credit score starts at zero. But the truth is, there is no such thing as a “starting credit score.” When you are new to credit, you build your credit score simply based on the way you chose to use it. When you open your first credit card, you will begin to build your credit score.

The key to building a strong credit score is to pay your bills on time and in full every single time. But there are several steps you can take to boost it even further in order to qualify for better credit cards down the line.

Become an authorized user

When you’re an authorized user, you are added to the credit card account of an existing cardholder — typically one belonging to 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 making all the 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

This should be a no-brainer, but the best way to improve your credit score is by adopting healthy habits from the very beginning. When you pay your bills on time, you boost your credit score. If you’re 30 days past due on a payment, it will be reported to the credit bureaus and your credit score will take a hit.

Limit credit inquiries

A hard inquiry shows up on your credit report each time you apply for a credit card. When you apply for a credit card, the lender will perform a hard credit inquiry, dinging your credit score a few points temporarily. With this in mind, don’t go on a credit spree and apply for every single credit card available on the market. Do your research to determine which credit card is best for you and apply for one at a time as a best practice.

Keep an eye on your credit utilization ratio

Your credit utilization ratio measures how much of your available credit you are using. This amount is expressed as a percentage, and it makes up 30 percent of your credit score. The lower this number, the better it is for your credit score. Once you get started with your first credit card, check out Bankrate’s 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 this comes with patience and solid financial habits. If you can commit to a long-term strategy when it comes to making on-time payments and keeping your credit utilization ratio within a healthy range, you will be on track to graduate from your secured credit card to an unsecured credit card in no time.

Orange County Register

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