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No Credit Score and No Credit Card, No Problem
Credit Cards for those without credit

     In our world today, your credit score affects many aspects of your life.  Nothing could be truer when applying for a credit card.  Your credit score is what creditors use to evaluate your risk as a borrower and its key in their decision making of whether to issue a person a credit card or not. 

But in order to build a credit score you have to open lines of credit.  So where does that leave those who have little to no credit history?  It is a bit of a catch-22, but there are ways to obtain a credit card when you have no credit.

     The good news is it’s typically easier to get a credit card with no credit than with bad credit.  However, it still doesn’t mean it’s easy and some processes take longer than others. 

It is definitely worth the work to establish a credit card since it’s a necessity in building your credit history which will be used to qualify you for other credit such as a home or car loan.  Also, a credit card makes it possible to reserve hotels online, shop online, and more which isn’t an option without a credit card.

     One of the best ways to become eligible for a credit card is to have someone that already has a credit line established act as a cosigner with you on a credit card.  A family member would be a good co-signer, especially for a teen or student. 

When you co-sign with someone else you’re basically piggy-back riding their line of credit which gives you built-in, established credit.  This is a huge benefit as long as you make sure the co-signer has a solid credit history.  You don’t want to start your credit history having to make up for another person’s struggling financial background.

     By having this good line of credit with a co-signer credit card applicants are much more likely to get the benefits of lower interest rates and fees which would not have been available with no credit.  Not only does this help you to have something of a credit score, but in the eyes of creditors the co-signer is also a safety net. 

When someone agrees to be a co-signer they are responsible for making sure the account is paid if the credit card holder fails to do so. The risk for the co-signer is great and this must be taken into consideration when deciding who to co-sign with.

     Another way to obtain a credit card with no credit history is to seek out a credit union.  A credit union is a financial institution that serves a local community with lending and banking services using member savings deposits and sales of shares for lending fund.  If you aren’t already a member of one you can look into whether you are eligible to be a member by simply visiting their websites. 

Credit Unions tend to be a little more lax in their lending procedures because you’re already a member of their institution adding to the credit union’s worth.  Getting a credit card through a credit union also typically has the added benefits of lower interest rates and fees that are offered to members.

     If neither a cosigner nor credit union is available, many people with no credit can find it easier to use a secured credit card initially.  A secured credit card is one in which the credit holder must first put down a deposit of a certain amount, usually it’s at least $300-500 though it varies. 

The deposit serves as the base of how much the card holder can charge.  Some companies will let you charge as much as 100% of the deposit you have made, however many will limit you to a certain portion of the deposit.  The reason you can only borrow up to 100% of the deposit at most is because the deposit serves as security for payment.

     If you don’t pay off the secured credit card, then the creditors will deduct the payment from your deposit.  Over time you can add to the deposit amount to up your credit limit as well as become eligible for borrowing a higher percentage of the deposit. 

There are dangers to look for with this type of credit.  Like any line of credit, if you don’t pay on your secured credit card you’re credit score will suffer, undoing the work you’ve done to build your credit.  Also, like a regular credit card interest is charged on unpaid purchases which can increase the cost.

     Sometimes it just isn’t possible to get a credit card right away that is affordable to you without credit.  In those instances it’s in your best interest to begin slowly building your credit.  The first thing to try is asking businesses that you already have good standing accounts with, such as your cell phone provider, to report your good standing to the credit agencies that are tracking and calculating your credit score. 

Transunion, Equifax, and Experian are the three credit reporting agencies in America where you can check on your credit score, and if you’re successful in getting service providers to report your paid accounts you must make sure they report to all three to see real benefits.

     Specialty cards are also another way to build your credit line.  Many retail and grocery stores offer credit cards for use in that particular establishment.  Many gas providers also offer gas cards that can be used at their stations for purchases. 

Though these cards are limited in their use, they are a perfect way of showing that you’re a responsible borrower and can help you start your credit history off right as long as you are indeed a responsible borrower.  Like any other card, if you don’t pay on the card, you pay on your credit report and later on when interest is added to the charges.

     Many of those without credit are in the predicament simply because they haven’t had time to build a credit history.  This is common for teens and young students starting college who are looking to open their first credit card account.  However, this need has been realized and many creditors are now offering cards tailored specifically for teens and students. 

Because these borrowers are new to credit it is a wise decision to start with a low credit limit and learn solid money management skills that can be taught while still under the supervision of an experienced adult. 

     There are some institutions that will bypass the credit score and focus more on an individual’s financial situation and past.  There are also traditional credit card providers who offer programs specifically for borrowers with no credit.  However, other options should be considered first as these typically have very high interest rates and less leniency on non-payment and fee charges. 

Whatever route you choose to begin your credit history with, it is imperative that you make payments on time to keep your credit score healthy.  If you are more than 30 days behind most all creditors will report you to the credit report agencies and you’ll see the credit score you’ve worked so hard for start to slip.

     It would be in your best interest to educate yourself on the responsibilities that come with credit as well as the dangers.  The Federal Trade Commission is a group that works toward educating consumers and also protects them against credit fraud.  To learn more you can visit their website at www.ftc.gov.