By Allan Halcrow | American Express Credit Intel Freelance Contributor
6 Min Read | January 17, 2020 in Cards
No credit history? No problem. There still are ways to get your first time credit card.
“Alternative approval criteria” can include things like banking history and utilities payments.
Student cards, store cards, secured cards, and using a cosigner are all potential paths to your first credit card.
Can you get a credit card with no credit? Can something come from nothing? That may be an ongoing debate in physics and theology, but when it comes to a first time credit card the answer is a decisive yes. It is possible to get a credit card when you have no credit history. In fact, there are several options to consider, each with advantages and disadvantages that vary depending on your situation and goals.
But first things first. If you don’t already have a job, you’ll probably have to get one. To be approved for any of these first time credit card options, you’ll need to make enough money to pay your bill each month. That’s especially true if you’re young. The Credit Card Act of 2009 says that applicants under 21 cannot be approved for a card without proof of income (unless they have a cosigner).1
Once you’ve landed that job, you may want to consider looking at other aspects of your finances (such as banking history or payments to utilities) to, in effect, help compensate for your lack of credit history.
There are a couple of ways to do that. First, some credit card issuers no longer require credit history to apply. Instead, they use what they call “alternative approval criteria,” which includes banking history.2 In short, they are looking to see that you have an income and don’t overdraw your account.
Similarly, some credit reporting services let you choose to report payments to utilities and telecom companies on your credit report.3 Doing so is not the same as having credit card payment history, but it does show an ability to make consistent payments and can boost your credit score.
Although they are a good start, neither a job nor a history of paying your electric bill on time will guarantee that you can get a credit card when you lack credit history. Even if they did, you’d still need to decide which card (or kind of card) to apply for.
This is the point at which weighing the pros and cons of your choices (all of which will help you begin to establish credit history) comes into play.
Student cards are an option for those still in school. To get one, some creditors will require you to prove that you’re enrolled in a qualified college or university. You have options within this category (some student cards offer rewards, for example), so do some research before choosing.
Retail credit cards (also known as store credit cards) are offered by retailers to help build customer loyalty and promote sales.
If you’re not able to get a student or a store credit card, there are at least two other options for getting a card in your name. The first is a secured credit card, usually the default for those not able to otherwise qualify. In general, you deposit funds in an account and the bank issues a card with a credit limit equal to your deposit. Many banks offer the option of converting a secured card to a traditional card after you establish sufficient payment history. At that point, you get your deposit back.
One last possibility for getting your own card is to apply with a cosigner. That person applies with you and therefore is on the hook if you can’t keep up with your payments.
If you aren’t able to get any of those cards, your last option probably is to become an authorized user on someone else’s account. They have to give permission, of course (hence the “authorized”), and they may determine your credit limit, too.
Once you’ve evaluated your options and chosen the card you want to apply for, credit experts suggest that you read the fine print. Be sure you understand the fees and interest you’ll pay, and other terms of your agreement. And when your card arrives, they emphasize using it responsibly to avoid financial risk like spiraling debt. To build up your credit faster, use roughly 30% or less of your available credit (that percentage is known as your “credit utilization rate”)4. And make monthly payments on time.
Yes you can get a credit card even if you have no credit history. But lacking credit history generally limits your options, so the card you get will likely cost more and have a lower credit limit. Still, if you use it wisely that card can help you establish and grow your credit history so that, ultimately, you can qualify for a better card.
Show Article Sources
1 Credit Card Accountability Responsibility And Disclosure Act Of 2009, Federal Trade Commission
2 “How to get a credit card with no credit history,” U.S. News & World Report
3 “Only Experian can raise your FICO® Score instantly,” Experian
4 “How to Get a Credit Card and First Time Credit Card Options,” Intuit Turbo Blog