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How to Apply for a Credit Card with No Credit
A lack of credit history shouldn't stop you from getting a credit card. It simply means you don't have any active credit accounts being reported to the three credit bureaus, or your credit history is so limited they're unable to generate a credit score for you. A credit card can be an excellent way to both build credit and build credit history.
Several options are available for those in the "cards for no credit" category. In this article, we'll show you how to apply for a credit card with no credit history.
What you may need to fill out your application
For your application, you'll need to collect a few items of personal information. Credit card issuers may ask for things such as:
- Full legal name
- Social Security number
- Gross income—how much you earn annually, before taxes
- Current address
- Bank account information
You typically have to be at least 18 years old to open your credit card account. If you're under 21, credit card issuers may require that you meet some additional requirements to do so. If you are under 21, you may be able to open a credit card account with an eligible co-signer as well.
Factors to think about
When deciding to get a credit card — whether your first or your tenth — there are several things to evaluate.
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How much is the annual fee? Many cards don't charge annual fees. But when you don't have any credit, your options may be limited. You might decide to pay an annual fee to get the card you want.
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Are there other fees? Review cash advance fees, ATM fees, or foreign transaction fees. All the cash you pull from your credit card account often comes with a higher interest rate than the rate applied to purchases.
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What about opening a rewards credit card or premium credit card account? Rewards cards and perk-filled cards might be targeted to consumers with well-established credit histories. If you have no credit record, you might have a difficult time getting approved for one of these.
What is a credit score
As defined by FICOscore.com, a credit score is "a number summarizing your credit risk, based on your credit data. A credit score helps lenders evaluate your credit profile and influences the credit that’s available to you, including loan and credit card approvals, interest rates, credit limits and more."
When you apply for a credit line, the lender does a credit check. The credit report usually comes from one of the three major credit bureaus: Experian, Equifax, and TransUnion. Credit reports may contain information about your finances such as:
- Identifying information
- Credit accounts
- Credit inquiries
- Bankruptcies and collection
A FICO® score is a three-digit number calculated from the data on your credit reports at the three major consumer reporting agencies—Equifax, Experian, and TransUnion. These scores generally range from 300-850.
But a score can't be calculated for people who don't have any credit history. That's called being "credit invisible," and it can happen for a number of reasons. You could, in theory, be a multimillionaire and be credit invisible if you haven't had a recent credit account.
Why it matters
Credit scores and histories help lenders determine if you're fiscally responsible. A lack of a score or credit history can also cause problems with:
- Obtaining loans
- Renting houses or apartments
- Renting cars, trucks, boats, RVs, and expensive tools
- Getting a job—especially involving financial responsibilities
- Security clearances
It takes a while to establish credit, too, so start as soon as you can. A few weeks or months after you open an account, the lender will probably report it to credit bureaus. An account typically must be open for six months, and at least one payment reported, before a score is created.
Once you have established a credit history, and the bureaus assign you a credit score, a lender from whom you've applied for credit, may evaluate your credit score as part of your application for credit. The credit score may affect the credit limit, interest rates, fees, and other aspects of the credit you are offered.
How a credit report is pulled
When a lender obtains your credit report to make a decision on your application, that's called a "hard inquiry" or "hard pull." When you have a credit history, that hard pull might cause your credit score to dip a few points. Without a credit history there's no credit score, so hard inquiries are more of a future concern as you build credit.
Options to start your credit history
Several options are available to people who are trying to build a credit history and can't obtain traditional credit cards.
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Store credit cards. Some folks turn to store credit cards as they try to build credit. However, card holders may be limited to making purchases only through that vendor
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Credit builder loans. Many financial institutions offer credit builder loans for credit-invisible and credit-damaged consumers. They're typically for small amounts, like $1,000 or less. The lender deposits the money into a savings account on your behalf. You make payments, with interest, and when you have paid off the loan you have access to the money. Meanwhile, the lender may report your payment history to at least one of the credit bureaus
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Student credit cards. Some lenders offer student credit cards with no credit score required. If you're an enrolled student, with regular and provable income, you may qualify for a student credit card. The lenders understand that although you are “credit invisible,” your enrollment and income overcome other credit requirements
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Secured credit cards. With a secured card, you first make a security deposit with the lender. This refundable security deposit determines your credit limit. (Many secured cards have a minimum starting deposit.) For example: deposit $300 in your account, your card gets a $300 credit limit. Your deposit remains in a savings account to secure borrowing. After a while, some secured cards increase your credit limit without requiring further deposits. These starter credit cards help establish your credit record and score
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Authorized users. Here's another option for credit building. Ask a family member or close friend to add you to their credit card account as an "authorized user." Authorized users are usually reported to credit bureaus, which could establish a credit history for you. The downside is that if the account holder misses payments, it may reflect badly on your credit history