For consumers with no credit, landing that first card can be a challenge. You can’t get credit without proving you’re a safe financial bet and you can’t prove you’re a safe bet without maintaining credit. Luckily there are steps you can take. Here’s what to do if you don’t have credit.
The fastest way to land credit is to go for a secured card. Secured credit cards allow consumers to prepay a certain amount — usually $200 to $500 — to establish the card’s credit limit. Card holders should pay balances in full each month to avoid being charged high interest rates. The benefit to secured cards is that they’re easy to obtain for people with no credit, and when used responsibly, they build your credit score if they are reported to the three major credit reporting agencies. The drawbacks are that because they’re targeted toward people with poor or no credit, the interest rates on secured cards are usually high — anywhere from 15 percent to 20 percent — so unpaid debts can multiply fast.
Become a student
No credit usually means no loans, too. That’s not the case with federal student loans. The federal Stafford student loan is one of the only loans available that’s not contingent on your credit score. Stafford loans are available to anyone enrolled in an accredited two- or four-year degree program and will build your credit provided that you pay it off on time.
Consumers with no credit should investigate local credit options first. In the hunt for your first credit card, hit up banks with which you have open checking and savings accounts before applying for other cards. While proving that you have an account in good standing isn’t a guarantee that you’ll be given a card, it certainly helps to prove that you can pay bills on time, keep an account from being overdrawn and stay out of fiscal trouble.