If you have no credit, credit cards may seem out of reach. When you visit the websites of the major lending institutions, one thing you will notice is the fine print stating “based on credit worthiness”.
You cannot have a credit file and a credit rating if you have never used credit to pay for purchases or rent or car payments. Lenders understand that and some offer the opportunity to apply for no credit credit cards.
These credit cards are not the same as credit cards issued to those with bad credit. If you have bad credit, you have a credit file that shows an inability or unwillingness to pay your bills on time.
Building a Credit File
For those starting their adult life, building a credit file is an important step toward becoming a financially responsible adult. If you are leaving home for college or preparing to start your first full time job, you may need to start building a credit rating.
If you have no credit, credit card and a credit rating may not seem like a critical financial worry. However, your credit rating affects more than your ability to buy purchases with a small plastic card for payment at a later date.
If you buy card, property or life insurance, your credit rating affects the price you will pay. If you want to rent an apartment, your credit rating reflects your financial responsibility in the past. It may not seem fair, but someone with no credit rating today is viewed as a high risk financially.
Perhaps the best method for building a new credit file is to begin while you are a college student. If you are under 21, no credit credit cards are available with your parent or guardian co-signing the new credit account.
For students under 21 with a verifiable income and no credit, credit cards are easy to acquire. Banks that issue credit cards know college students are good risks. The education they are pursuing will help them in beginning a career and these students will be credit customers for many years into the future.
Credit lenders once competed heavily for students business. You would find registration booths set up at every college campus on registration day. Gifts were offered for students who applied for a new MasterCard or Visa.
No Income Verification
Most applications were approved as no income verification was required. Though a student who had a bad credit record might be declined, that was rare as these were consumers at the beginning of a lifetime of earnings and financial management.
Another segment of the population that may seek out no credit credit card offers are newly widowed women. In the past, women frequently depended on the creditworthiness of their spouse but today we know each person needs to build his or her own credit file.
Women who have been married for many years may have nothing in their credit file that is not linked to the credit of their spouse. If the spouse is deceased, financial advisers often recommend the surprising partner begin building a credit file in their own name. The no credit credit cards provide an inexpensive way to do that.
The requirements for approval when you apply for a no credit credit card are not as restrictive as those required for a standard credit card. The cards are a valuable financial tool to build credit. The interest rate may be somewhat higher than for a regular credit card and the spending limit initially may be lower.
The value of no credit credit cards is not in the spending limit or APR of that particular credit account. The usefulness of these specialized offers is that the lenders report to the credit bureaus regularly and each report of a credit account used and payments made on time builds that all important credit rating.