How to Get a Credit Card 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.

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.

• 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.

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.

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.

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.

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.