It is necessary to use credit to establish a credit file but without any history it may seem impossible to get a credit card.
What is important is that you have no credit history as opposed to a bad credit history. The most common advice you’ll hear is to acquire a secured card. Before even thinking about that, there may be a better option for you.
Those who have a checking and savings account at a local bank should inquire about a credit card through that bank or credit union.
If you have maintained a balance in your accounts for some time and have managed those bank accounts in a responsible way, your local bank may be willing to issue an unsecured credit card to you.
This credit account would have a low limit of $500-1000 but that is good for your purposes as you are learning to use credit.
As you use the new account and make timely payments you will be able to have the credit line raised to reflect your newly acquired credit history.
That card will also be valuable in the future and help you obtain other credit cards with more favorable interest rates or benefits.
Secured Card
If your bank accounts are relatively new ones, your bank may offer you a secured credit card where the “security” is a portion of your savings account.
If the credit card carries a Visa or MasterCard logo and the bank reports to the credit bureaus, this is another good option for you.
Searching online for credit cards that require no past credit history is another route you might choose.
Most of the offers will be secured and may also be called prepaid accounts. Your credit limit is the amount of money you deposit when you get the credit card.
Make Sure To Read The Terms!
If a secured credit card is the only option you find available be certain to carefully read the terms on the account.
The goal is to establish you as a credit worthy individual. This means the lending company must make regular reports to the credit bureaus.
If they do not report at least quarterly (monthly is better but can be hard to find) to credit agencies, the new credit will not help you establish a rating that will help you financially in the future.
The terms you are offered will depend on your personal circumstances. If you apply for credit and have no source of income, you may find the only choice open to you is secured accounts.
If these accounts are tied to a major credit card provider and can be converted to standard accounts in the future, it will work to your benefit.
Are You a Student?
If you are a student, this is the perfect time to obtain your first credit card as lenders are still targeting college and high school students as potential new customers and are quick to issue new accounts to these future professionals.
Students are not expected to have income. New credit laws will require parents to accept secondary responsibility for student credit cards but currently Visa and MasterCard in particular are issuing credit accounts to college students based on the perception of future earnings potential.
Never Apply Immediately
If you are one of these people without credit history you will be an easy catch for the credit companies. In order to avoid this, I want you to keep in mind that you should not go online and apply for the best offers and bonuses you find.
These accounts are not available to someone who has not yet established a history of good payments and responsible money management. Apply for multiple cards can hurt your credit rating as the applications – and the refusals – will show in your credit file.
Start with your own bank and explain that you need a credit card. If that doesn’t work, go online and search for lenders who grant credit accounts to those with no credit.
Read the fine print to know how the account works and whether the lender reports to credit agencies.
You will get a credit card and by using it wisely and making timely payments you will begin to establish a good credit history.
