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How to Get a Credit Card with No Credit History

Looking to get a credit card for the first time but have no credit history? There are many ways to boost your chances of getting a first time credit card approved.

By Allan Halcrow | American Express Credit Intel Freelance Contributor

6 Min Read | January 17, 2020 in Cards

 

At-A-Glance

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

 

Alternatives for First Time Credit Cards with No Credit History

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.

 

Weighing the Pros and Cons of First Time Credit Card Options

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 Credit Cards

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.

  • Pros: Lenders are generally more forgiving of lower income and/or no credit history. Many cards include financial planning tools, such as access to your credit scores.
  • Cons: Some student cards have high fees and high interest rates.

 

Department/Grocery Store Credit Cards

Retail credit cards (also known as store credit cards) are offered by retailers to help build customer loyalty and promote sales.

  • Pros: Generally easier to qualify for than more general cards.
  • Cons: Only valid in the issuing store. Interest rates are often high. Credit limits are often low.

 

Secured Cards

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.

  • Pros: Easier to get than traditional cards because they are low-risk for banks—if you don’t make your payments they keep your deposit.
  • Cons: You must have funds to deposit. Credit limits are usually low. Some banks don’t report secured card activity to the credit bureaus, so it’s good to check before you apply if you want to build credit history.

 

Credit Cards with a Cosigner

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.

  • Pros: Help from the cosigner makes it easier to get approved despite no credit history.
  • Cons: Your finances are tied to someone else. Your cosigner can see your statements, so you don’t have much privacy. If you skip payments (or are late), your cosigner’s credit also suffers.

 

Become an Authorized User

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.

  • Pros: Can be a fast way to build some credit history, without even using the card. You won’t get statements and are not legally responsible for charges on the card.
  • Cons: The owner’s payment history (good or bad) will affect your credit score, too. Because you don’t own the card, you don’t have certain rights, such as asking for an increase in the credit limit.

 

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.

 

The Takeaway

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.

Allan Halcrow

Allan Halcrow is a freelance writer concentrating in business, human resources, and diversity and inclusion. He is also the author of four books on management.

 

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express. 

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