Guide on How to Get a Credit Card with No Credit
A surprising 30% of all Americans do not own a credit card. If you are one of these people and would like to get a credit card, but don’t have any previous credit history and don’t know where to start, you are in the right place. There are several negative effects that a person can experience by not having a line of credit. Difficulties may include the inability to get a mortgage for a house or having the ability to rent an apartment or even a car. Fortunately getting a line of credit in order to correct this is not difficult and can be accomplished in less than 10 minutes.
My Personal Experiences With Having No Credit History
Having no credit history is not a fun experience sometimes. There were a few times in my life where I really felt the need to get a credit card and build credit. The first time was when I traveled across the country for a job interview and I needed to rent a car. The process was truly a hassle. I was delayed at least 20 minutes because I needed to dig up extra documentation for them to allow me to rent a car. This is because I didn’t have any credit history.
The next time I had problems with having no credit history was when I was looking for a place to rent for the first time. Some of the places I looked at were not interested in renting to me because I had no credit.
My saga with having no credit history didn’t stop there. When I finally did decide to apply for my first credit card the credit card company rejected me because I didn’t have, get this, any credit history. After this, I finally looked into it and learned about secured credit cards.
How to Get Approved for a Credit Card with No Credit History?
Normally when a person applies for a credit card the credit card company does what is called a hard inquiry on the person’s credit History through one of the three major credit reporting agencies. This process turns out to be a chicken and the egg problem for people with no credit history. On the one hand you would like to apply for a credit card to build credit history, but you can’t build credit history because you don’t have a credit card.
Fortunately there is a special kind of credit card designed just for this kind of scenario. These types of credit cards are called secured credit cards and allow people with no credit or extremely low credit scores to still apply and get approved for a new credit card.
How Do Secured Credit Cards Work?
Secured credit cards solve the issue of people not having credit history by requiring the person to lay down a refundable deposit in exchange for an account that has a credit line equal to the amount that you deposited. Essentially, the security deposit is acting as collateral. By doing this, the credit card company feels safe enough to give a person a line of credit. In the event that a person fails to pay the amount owed, the credit card company can tap into the security deposit as a last resort.
But assuming that all balances were paid in full and on time every month, the refundable deposit will be reimbursed to you in 6-12 months after opening. After this It is not uncommon for the credit card company to increase your credit limit as they develop trust with you.
Best Secured Credit Card for No Credit History?
When it comes down to a competition between the best secured credit card out there, the Discover it secured card consistently ranks number one on people’s lists and is the one I personally have used and recommend. The Discover IT secured card has 1% cash back on all purchases, for the first year this is 2%. Also, Discover doesn’t charge a fee to have an account open.
Sadly, in contrast, there are many other credit card companies that deliver a horrible service to their customers by charging a fee to anyone having a secured credit card. On top of this, many of these cards don’t have any cash back whatsoever. This is why the Discover it secured card really shines.
How to open a secured credit card
Opening a secured credit card is relatively straightforward. Be prepared to have the following information when making an application.
- Question on whether the applicant is a US citizen.
- Social security number (SSN)
- Gross income per year
- The company the applicant works for
- Question on the amount the applicant pays on rent or mortgage.
- Contact information(i.e. email, phone number and address)
- Setup for account username and password
What Should I Do After Getting My Secured Credit Card?
It is extremely important that when a person finally receives their credit card that they pay off the balance in full every month. Not only would a late payment hurt the credit score and leave a person paying more in the end.
For amounts not paid, it’s not uncommon for credit card companies to charge 20+ percent interest on the amount due. A small balance at first can quickly compound into a very large balance. This is why it’s a good idea to set up the credit card to have auto pay to ensure payments are never late.
Additionally to get the best possible credit score it’s also recommended not to use more than 10% of the available credit limit on the credit card. For example, if a credit card has a $2000 limit, don’t put more than $200 on the card. This might seem ridiculous when a person could easily spend much more. But, the important thing is to build a great credit score. With a great credit score a person can get a better credit cards that have more rewards.
