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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
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.
Jasper Cash Back 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% – 24.99% variable APR and lack of an annual fee help make the Jasper Mastercard an economical choice for young professionals on a strict budget. Get up to 6% cash back by referring friends! Limited time only: Start with 1%, get to 3% cash back by successfully referring just two friends! Promotional cash back rate lasts for a full year. Receive your cash back automatically every month as a credit to your account, as long as your account is active and in good standing.
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.
Read our Jasper Cash Back Mastercard® Review.
Discover it® Student Cash Back
Why we rate it best for rotating cash back bonus categories
Even as a credit card beginner, you can use Discover’s rotating bonus categories to earn cash back rewards like an experienced veteran. To do it, you’ll need to activate the bonus categories each quarter and then plan your purchases to line up with the Discover cash back calendar. Your reward will be earning 5 percent cash back on up to $1,500 in purchases per quarter, then 1 percent.
Most cash back cards fit in the “set it and forget it” category, earning flat rates on eligible purchases year-round. With rotating bonus category cards like the Discover it Student Cash Back, you’ll need to be more of an active participant. If you’re up to the challenge, your cash back earnings could be substantial.
As a student-friendly card, the Discover it Student Cash Back also provides an incentive to work hard in the classroom. Every year you have a GPA of 3.0 or higher (for up to 5 years), you earn a $20 statement credit.
Read our Discover it® Student Cash Back review.
Secured Mastercard® from Capital One
Why we rate it best for accessing a higher credit line
The Secured Mastercard from Capital One 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 with on-time monthly payments.
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 benefits, which include fraud protection and emergency card services.
There’s no annual fee, no set-up fee and no maintenance fee.
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 1 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 1 also reports to all three major credit bureaus, giving you the best chance to improve your score.
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.
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.
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.
Discover it® Secured Credit Card
Why we rate it the 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 combined 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.
Read our Discover it® Secured Credit Card Review.
Citi® Secured Mastercard®
Why we rate it best for no monthly maintenance fee
This starter card may not come with rewards or a slew of perks, but you’ll avoid monthly maintenance fees and annual fees. If you practice good credit habits, Citi may refund your initial deposit and upgrade your card within the first 18 months.
You’ll have free online access to your FICO Score at any time. The card offers automatic account alerts, auto pay, choice of payment due dates and identity theft protection, among other features. Cardholders can also take advantage of exclusive offers through Citi Entertainment®.
A $200 minimum security deposit is required to open an account, and the regular APR is 22.49% (variable) APR — comparable with similar cards but still several points higher than the average credit card interest rate.
Read our Citi® Secured Mastercard® review.
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’re 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 you can build credit without a credit card
If you’re not quite ready to apply, you do have other credit-building options apart from using 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. Loans count toward your payment history, just like other forms of credit.
- Look into credit scoring models such as UltraFICO or Experian Boost that use expanded criteria to evaluate creditworthiness.
Why you might have more credit history than you think
So-called “thin-file” consumers who’ve never taken out a car loan or a mortgage tend to come up short under the traditional definitions of credit history. The good news is that newer credit-scoring models and payment-reporting services have the potential to benefit consumers who have good credit habits even if their traditional credit profiles are lacking.
Credit bureaus have traditionally focused on payment history, length of credit history, amounts owed, credit mix and new credit. Experian Boost and UltraFICO supplement that information by adding deposit accounts to the mix — checking, savings and money markets — and considering factors including:
- How long the accounts have been open
- The accounts’ level of activity
- Amounts in savings accounts
- Mobile wallet transactions such as PayPal and Venmo
Experian Boost also factors in payments for utilities, eligible streaming services and cellphone service. Services such as PayYourRent and RentTrack that report your rent payments to credit bureaus could also help you leverage a history of being a good tenant into a better credit score.
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 make a good start by spending responsibly and paying your bills on time.
Making on-time, in-full payments has a positive effect on the most important of several factors that determine your credit score. A solid payment history 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. 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 serve your well.
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:
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.
- 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 [email protected]
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.
Make sure to check the credit report from each credit bureau. If you find any errors, contact the bureau to dispute them and have them removed.
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. A hard inquiry will temporarily lower your credit score while a soft inquiry has no effect.
Pre-qualified offers don’t require a hard inquiry, so keep an eye out for pre-qualification features like CardMatch™. You can get a better idea of which cards you might qualify for without taking a short-term hit on your credit score.
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. Be selective about which cards you apply for.
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 [email protected]