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How (and why) to get a credit card if you have no credit history
Even if you have no credit history, a credit card could still be a viable option. Many financial institutions offer cards designed specifically for people who have yet to start building their credit profile.
The top credit cards for no credit history offer more than the everyday convenience of cashless transactions. They also offer benefits including educational resources for your credit-building journey. For you, that journey can begin with choosing the right credit card.
Bankrate’s top picks: Starter credit cards for no credit history
A closer look at top cards for no credit history
Deserve® EDU Mastercard for Students
Why we rate it the best overall student card
The Deserve EDU Mastercard for Students not only makes it simple for U.S. and international students to build credit with a unique approval process, but also offers easy-to-earn rewards with 1 percent unlimited cash back on all purchases.
Plus, if you pay with your Deserve® EDU Mastercard for Students, you’ll get a one year reimbursement on an Amazon Prime Student membership after spending $500 in the first 3 billing cycles (lifetime value of $59), which is a great perk.
A card that allows you to build your credit in a manageable way while also earning generous rewards could help your journey into personal finance get off to a smooth start.
Learn more and find out how to apply.
Capital One® Secured Mastercard®
Why we rate it best for accessing a higher credit line
The Capital One Secured Mastercard is designed to help you achieve a solid financial footing, with responsible use. You will be automatically considered for a higher credit line in as little as 6 months.
The card lets you pay your initial opening deposit in $20 installments, which could be a real help for anyone on a fixed income. You have 35 days of being approved, to pay off your opening security deposit, which could range from $49, $99 or $200.
This card comes with Mastercard Platinum benefits, which include travel and auto protection.
There’s no annual fee, no set-up fee and no maintenance fee.
Learn more and find out how to apply.
OpenSky® Secured Visa® Credit Card
Why we rate it best for no required credit check
Previous credit history or lack of credit history won’t be a barrier to obtaining the OpenSky Secured Visa Credit Card. You can qualify by making a fully refundable deposit with OpenSky into an FDIC-insured account.
Payments will be reported to the three major credit bureaus every month, a critical factor in helping you establish credit history. Late payments won’t affect your APR.
Also, the website for OpenSky’s Secured Visa Credit Card is well-designed and accessible. The terms of the card and information about how you can build or improve credit with the card are easy to navigate and written in clear language.
Learn more and find out how to apply.
Journey® Student Rewards from Capital One®
Why we rate it best for student travelers
Students who travel frequently, whether it’s on the road or abroad to a foreign country, might find this card a handy companion to have in their wallet.
The card doesn’t charge a foreign transaction fee, which makes it good for both international travel and online purchases from overseas vendors. Features also include travel accident insurance for a covered loss at no extra charge (when you use the card to purchase your fare) and Auto Rental Collision Damage Waiver.
This card could also help students reap the benefits of responsibility — with on-time payments, they can boost the 1 percent cash back rate to 1.25 percent for that month. Another incentive to pay on time is, unfortunately, the card’s high variable APR of 26.99%.
Learn more and find out how to apply.
Petal 2 “Cash Back, No Fees” Visa® Credit Card
Why we rate it the best card with credit-building app
The Petal 2 Visa Credit Card is a solid choice for consumers with no credit history, particularly those who make mobile apps a big part of their daily lives.
Using the Petal 2 Credit Card app, cardholders can plan a budget, stay updated on their credit scores and set up automatic payments to help them build a solid credit history. Also, the card’s cash back program rewards responsibility by increasing the rate from 1 percent to 1.5 percent after you make 12 on-time monthly payments.
The Petal 2 card’s Cash Score analysis means you don’t need a credit history to apply, and the lack of fees makes it an intriguing low-cost option. Young consumers who use apps for virtually everything will probably enjoy having credit-building at their fingertips.
Learn more and find out how to apply.
Petal 1 “No Annual Fee” Visa® Credit Card
Why we rate it best for local cash back offers
Shopping local is great for your community and, with the Petal 1 card, it can even save you money. Within the same app that allows you to check your credit score and pay your bills, you can find cash back offers near you. Simply share your location and the map will populate with 2%-10% cash back offers at select local merchants.
For those who are serious about improving their credit, this card is chock-full of helpful features. To start, Petal can calculate your credit limit and interest rate by using your banking history, which means that your credit history (or lack thereof) isn’t as important. Petal also reports to all three major credit bureaus, giving you the best chance to improve your score.
Learn more and find out how to apply.
Self – Credit Builder Account + Secured Visa Credit Card
Why we rate it best for building credit with savings
The Self – Credit Builder Account + Secured Visa Credit Card is an innovative option for anyone who prefers a more gradual approach to establishing a credit history.
Make on-time payments to your Credit Builder Account, which will be reported to the major credit bureaus. Those on-time payments allow you to qualify for the secured card, and you’ll use the savings from your Credit Builder Account for the deposit.
The process takes 12-24 months*, which could be ideal for young people still in school. Also, there’s no penalty APR with the Self – Credit Builder Account + Secured Visa Credit Card.
Learn more and find out how to apply.
The Jasper Mastercard®
Why we rate it best for new professionals
The Jasper Mastercard aims to help budding professionals build their careers and credit histories at the same time. The generous credit limit (up to $5,000), lower-than-average 15.49% variable APR and lack of an annual fee* help make the Jasper an economical choice for young professionals on a strict budget.
Also, the application process removes some of the traditional credit barriers faced by newcomers to the United States with work visas, including a hard credit check. You don’t need a U.S. credit history to apply.
The card also features account management and credit-building tools.
Learn more and find out how to apply.
Discover it® Secured
Why we rate it best secured card with rewards
This is Bankrate’s highest-rated secured card, and for good reason. This card is one of the few designed for those with little to no credit that offers cash-back rewards at a respectable rate.
The Discover it Secured earns 2 percent back on dining and gas up to $1,000 in spending per quarter and 1 percent on everything else. Earning cash back while building your credit is a potentially beneficial combination. Just remember to pay your bill on time and in full, and avoid chasing rewards.
This card lets you establish your credit line by providing a refundable security deposit from $200-$2,500 after being approved. Bank information must be provided when submitting your deposit. Also, Discover will match dollar-for-dollar all of your rewards at the end of the first year of card ownership.
Learn more and find out how to apply.
Why building a credit history is important
Your credit history, often called your credit report, is a record of your performance as a borrower and user of credit. Improving your credit score can help when:
- Applying for a loan
- Upgrading a credit card
- Searching for a house or an apartment
- Negotiating car insurance rates
- Requesting higher credit limits
A good credit score might come in handy more often than you realize. Lenders refer to your credit history when you apply for car loans and mortgages. Many employers run credit checks on job applicants, and landlords routinely use credit reports when they screen prospective tenants.
Most credit card issuers report your spending habits and payment history to one of three major credit reporting agencies. These agencies compile this information with reports from other lenders such as your mortgage company or small loan lender to create your overall credit report and credit score.
A good credit history indicates that you’re a reliable and financially responsible person. Establishing a solid credit history will increase your chances of getting approved for loans and receiving better offers on interest rates. It could also lead to more opportunities in where you choose to work and live — a low credit score can even narrow your job search. Card issuers will notice creditworthiness as well, allowing access to cards with better rewards, APRs and other benefits.
Your credit history will probably have a large influence not only on your personal finances but also on other areas of your life. Used correctly, a credit card is one of the ways you can start building a solid credit foundation.
How to build credit history with a credit card
Your credit report is created when you open your first credit account, whether it’s a credit card, auto loan or some other type. What happens next depends a lot on your actions and decisions.
Building a credit history takes time. Building a strong credit history takes both time and good financial habits. Keep two key guidelines in mind as you think about building your credit history with a credit card:
1. Practice good spending habits
By practicing responsible spending habits with your credit card, you show the credit reporting bureaus and potential lenders that you are low-risk, meaning they have little reason to worry about you not paying your bills or maxing out your credit.
Also, overspending with your card could affect your credit utilization, the ratio that measures how much credit you’re using in relation to how much credit you have available. In general, it’s best to keep this ratio at 30 percent or less.
For example: If you have a card with a total credit limit of $1,000, aim to spend no more than $300 on the card in a billing cycle.
Online account management makes it easy to track your charges day to day without having to wait for a statement at the end of the month. Use your account’s dashboard to keep an eye on how much you’re using the card.
2. Pay your credit card bill on time and in full
Speaking of spending, making too many purchases with your credit card could also lead to big balances that are difficult to pay off in time. Late or missed payments never look good on your credit history.
A more immediate concern is Annual Percentage Rate, or APR. APR represents the cost of interest and other fees, and it applies to any unpaid charges carried over from one billing cycle to the next. To avoid APR, pay off your entire balance by the due date whenever possible.
Some credit-building cards provide extra incentive by offering to raise your credit limit after you’ve made a certain number of consecutive on-time payments.
How long does it take to build a credit history?
Each case is situational, but those just beginning their credit-building history will need three to six months before a score can be calculated. It takes a bit of time after opening your first credit account to get a three-digit score, but this window is an opportunity to start off squeaky clean.
Opening a credit card account can be a great start. With the right money management, you can make on-time, in-full payments to your card issuer — the most important of several factors that determine your credit score. This can help establish a solid credit score faster than expected, sometimes in less than half a year.
Most lenders refer to the FICO Score or VantageScore methods when assessing credit scores. The same principles apply for each: Both range from 300-850, a higher score indicates a less risky cardholder and demonstrating good habits will help you get an increase.
You may have no control over the method your credit issuer is using, but making timely, sufficient payments, maintaining a credit utilization of under 30 percent, keeping a variety of credit accounts and staying consistent will do you well no matter what. Building with a credit card can be a great tool to get into a routine as you look to add to your credit mix — a way to show credit issuers you can manage multiple lines.
If you want to keep it simple with one credit account, knowing what not to do early on is essential on your credit-building path. Before anything else, avoid late or missed payments. When approved for a card, take note of when you’re due to pay. Set an alarm, a calendar reminder, write it on your whiteboard — do not miss payments in the honeymoon stage of this new responsibility. Late or missed payments will lead to a negative outlook on your creditworthiness, and you don’t want to be put in a hole by a lasting first impression. Climbing out of a bad credit score often takes over a year, so putting proper habits on display in the early months is the best way to establish yourself.
How you can build credit without a credit card
If you’re not quite ready to do the research and start shopping around, you do have other credit-building options apart from a credit card. They include:
- Become an authorized user on another person’s card, such as a parent, spouse or partner.
- Sign up for a service that reports rent or utility payments to the three credit bureaus (also known as self-reporting) so that these payments are reflected in your credit history.
- If you have a car loan, personal loan or student loan, be diligent about making your payments on time.
Fortunately, some financial institutions are taking steps to better serve consumers who lack a traditional credit profile. One example is Experian Boost, a program designed to incorporate factors such as telecommunications payments (as in your monthly cellphone bill) into credit scores.
Requirements to get a credit card
- You must be at least 18 years old. You cannot be approved for your own credit card as a minor. Even at 18 – 20 years old, you will be asked to provide proof of independent income or to have a parent cosign on your application, as required by the Card Act of 2009. One option for minors seeking access to credit is to become an authorized user on a parent or guardian’s credit card. There is no age requirement to become an authorized user, and you’ll also be able to build credit.
- You must have an income source or access to an income source. Credit card applications will ask for your income. If you don’t have an independent source of income, you may list that of your parent or partner, as long as you have “reasonable expectation of access” to that money, like having a shared bank account. This is an amendment to the Card Act of 2009.
- You’ll usually need a Social Security Number or an Individual Taxpayer Identification Number. In most traditional cases, you will need to provide your Social Security Number on a credit card application; Discover, Synchrony Bank and Barclaycard require it. However, some issuers like Capital One and American Express may accept an Individual Taxpayer Identification Number in place of a SSN. An ITIN is a nine-digit number issued by the IRS to a tax-paying individual who lives in the U.S. and does not have a Social Security Number. Keep in mind that you may still be denied with an ITIN due to a lack of credit history within the U.S.
CardSmart: A new graduate’s first credit card
I recently received an email from someone who visited our site with questions about credit scores and rewards cards. Taylor is a recent college graduate planning to apply for her first credit card, and she wanted to know:
- Is FICO the most reliable measure of her credit score?
- Would checking her credit score actually hurt her credit score?
- Are travel cards better than cash back cards?
- Does she have the credit score to qualify for a travel card?
Here’s a summary of my answers:
Credit scores
My advice to Taylor was to make FICO her first choice, for reasons that involve market share more than reliability. FICO says that its credit scores are used in 90 percent of lending decisions, so chances are high that your FICO Score will play a prominent role when you apply for a credit card.
I also clarified that checking her credit score with FICO or any other credit scoring service is considered a “soft inquiry” rather than a “hard pull” and won’t affect her score.
What kind of card should she get?
Taylor is correct about a travel card potentially being harder to qualify for, especially for someone with limited credit history. Unless she travels a lot (as in several extended trips a year, with airfare and hotel stays), getting her money’s worth with a travel card could be tricky.
I also told her about my own experience with cash back rewards, which has been quite positive. My current card earns 3 percent cash back on gas, 2 percent on groceries and utilities, and 1 percent on other general purchases. Since I pay my monthly bill on time and in full like clockwork, I don’t have to worry about interest or late fees cutting into my rewards earnings.
For Taylor’s first credit card, I recommended a general-purpose card that can help her further establish her credit history. And if she qualifies for a card that also earns simple cash back rewards, that would be icing on the cake.
The takeaways
- Knowing your credit score before you apply for any kind of credit is essential. Many credit card issuers display a recommended credit score before you apply so that you can better estimate your chances of qualifying. Also, checking your credit score won’t do any damage.
- Your lifestyle and financial status affect what your ideal credit card will be. People with no credit history tend to be on the young side, just starting their financial journey. A cash back card would generally offer a better fit for a student or a young professional than a travel rewards card. (A young professional athlete making $10 million a year and planning a getaway to Fiji in the offseason might be a different story.)
But we can’t all be millionaires, which is part of the reason Bankrate is here to help you make well-informed financial decisions. If you have questions about credit cards, credit scores or personal finance in general, please email me at bbridges@bankrate.com.
Tips on applying for your first credit card
Making your first-ever credit card application doesn’t have to be intimidating. Consider a few guidelines that can help you prepare:
Check your credit report before getting started
If you don’t know what’s on your credit report, you don’t really have an idea where you stand. Fortunately, you’re allowed to request a free copy from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year.
You can choose one of three options:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
When you make the request online, your credit report should be available immediately after you’ve verified your identity. With phone or mail requests, the report will be mailed to you within 15 days.
Why you should check your credit report before applying for a credit card
Errors could be present on your credit report, errors you might not even know about unless you checked. It could be anything from a misspelling of your name to an old debt mistakenly listed as unpaid. If your credit report has an error, it could make you appear to be a less desirable candidate to receive a card, loan or other form of credit.
Fortunately, all three major credit reporting bureaus have processes in place for disputing and correcting errors. You can check each bureau’s website to find out the details:
Make sure to check the credit report from each credit bureau. If you find any errors, contact the bureau where the error appears. When you’ve removed things from your credit report and it is accurate and up to date, you can start shopping for a card with more confidence.
Look for pre-qualified offers
Credit card issuers and other types of lenders can perform two kinds of credit checks when someone submits an application: a hard inquiry and a soft inquiry.
Pre-qualified offers use soft inquiries. A hard inquiry will temporarily lower your credit score. A credit score isn’t the same thing as credit history, but both play an essential role in your access to credit.
Be ready to submit some information
It’s routine for the card application process to require some basic information, even if you have no credit history. The issuer will need to verify your identity, which is why you’ll be asked for details such as your full name, date of birth, Social Security Number and address.
Depending on the type of card and the issuer, you might also need to provide your yearly income, monthly rent or mortgage payments and other information that offers insight into your current financial situation.
Limit the number of applications you make
Applying for multiple cards in a short period of time could signal to lenders that you want more credit than you can responsibly handle. Also, remember that credit applications involving a hard inquiry will lower your credit score temporarily.
Frequently asked questions on credit cards and credit history
Are credit report and credit score the same thing?
Your credit report, or credit history, is different from your credit score. However, both are essential to your financial standing.
A credit report is a detailed account that includes a person’s credit accounts and debts, past and present. A credit score provides a way for lenders to measure your creditworthiness at a given point in time. It’s based on five criteria, with each one accounting for a certain percentage of the score:
- Payment history — 35 percent
- Credit utilization — 30 percent
- Length of credit history — 15 percent
- Types of credit used — 10 percent
- New credit — 10 percent
Who determines credit history?
Another difference between credit reports and credit scores is how they’re created. A credit report is created by Experian, Equifax and TransUnion, the three credit reporting bureaus. FICO and VantageScore and other scoring systems generate credit scores.
Financial institutions use credit reports, credit scores or both to make decisions about lending. With credit cards, issuers typically use your credit score but not your credit report to decide approvals, APR and credit limits.
Is no credit the same as bad credit?
Having no credit and having bad credit are two different things. Someone with no credit is typically someone who is just starting out, either as a young adult or someone new to the country. Having bad credit, however, means that you’ve possibly made poor financial decisions and are considered risky to lenders. Faced with choosing between the two, lenders are typically more favorable toward those with no credit.
For example, a landlord may look less favorably upon someone who has recently filed for bankruptcy than a recent college graduate with no credit who just landed their first job. In most cases, no credit is somewhat of a clean slate, taking less time to build up a strong credit profile than someone who has to wait until a bankruptcy is discharged or other bad credit issue is resolved.
Senior Editor Barry Bridges has been writing about credit cards, loans, mortgages and other personal finance products for Bankrate since 2018. His work has also appeared on websites including Nasdaq.com, Zillow.com and The Simple Dollar. He was previously an award-winning newspaper journalist in his native North Carolina. Send your questions about credit cards (and fantasy baseball) to bbridges@bankrate.com.
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