Can you get a credit card with no credit? This question is common among individuals who are applying for their first-ever credit cards. Especially for young adults who are trying to build up their credit and financial independence, getting approved for a credit card can be difficult. Credit card companies and banks want to see a certain amount of credit history—and hopefully a strong credit score—before they approve you for a credit card. At the same time, it can be difficult to build credit if you don’t have a credit card. Indeed, you won’t even have a credit score at all until you’ve had one account or line of credit on your credit report for at least six months. It’s a classic chicken-and-egg situation, and one that proves to be incredibly frustrating for people who are trying to get a credit card for the first time.
Why Can’t I Get a Credit Card?
The good news is that it isn’t impossible to get a credit card even if you have no credit history of which to speak. Before we delve into some of the specific strategies you can use to start building your credit, though, let’s take a look at some of the things you need to have to qualify for a credit card in the first place. Here are a few factors that might hurt your chances of getting approved for a credit card.
- You don’t have a job: Credit card companies want to see that you have an income stream and will be able to repay your credit card balance reliably and on time. If you aren’t employed or can’t show proof of income, your credit card applications are more likely to be denied. If you are gainfully employed, you’ll have a better chance of getting a credit card even with little or no credit to your name.
- You’re looking in the wrong places: Certain credit cards are intended for people with excellent credit. You aren’t there yet. For now, focus on applying for credit cards targeted toward people with little credit. A common strategy is to look into getting a credit card with your favorite grocery store or retail establishment. Some of these cards can be used anywhere and allow you to build up loyalty “points” with the store in question. Others are “closed-loop cards” that can only be used with the retailer that issued the card. The latter type of card obviously isn’t ideal—and will usually also come with a low credit limit and a higher-than-average interest rate on low payments—but it’s still an account that you can use to build credit.
- You keep applying for a lot of credit cards: Your strategy should never be to apply for a bunch of different credit cards and see who accepts your application. Lots of different entities pulling your credit report around the same time can actually hurt your credit. Instead, do your homework, identify a few credit cards that seem like good bets for someone without much credit, and start by applying for just one or two of them.
- You don’t have a co-signer: One of the easiest ways to start building credit if you don’t have any is to find someone who will co-sign. Parents will often co-sign on an initial credit card application for their son or daughter, for instance. Having a co-signer allows you to get a credit card and start building credit, with the caveat that another person is connected to your account. If you start missing payments, the co-signer is on the hook, and their credit is affected as well as yours. For this reason, the co-signer arrangement isn’t ideal in all situations and is by far the most common in the context of a parent-child relationship. Still, in the right situation, having a co-signer can be the single most straightforward way to give someone with no credit the boost they need to start establishing a credit history.
Other Options for Getting Your First Credit Card
If you don’t have a co-signer but are employed and believe you can make regular payments on a credit card balance, you might start by researching secured credit cards. A secured credit card is essentially a credit card that acts like a debit card. If you get a secured credit card through your bank or credit union, it will work almost exactly like your debit card. The card will be backed (or “secured”) by the money in your checking account. The only difference is that, instead of the money deducting directly from your checking account as it would with a debit card, you need to pay a “bill” to cover your credit card balance. Major credit card issuers also offer secured cards, and with these cards that exist outside of your bank, you would make an upfront “security deposit” that would act as your “credit.” In either situation, a secured credit card will typically have a very low credit limit—$200 is common—but won’t demand much or any credit history to get approved. Many people looking for a student credit card will go the secured card route, just because it’s so easy to set up and has so few prerequisites.
Another potential option to consider is a credit-builder loan. The bank or credit union loans you a small amount of money, usually no more than $1,500. Instead of giving you the loan funds upfront, though, the bank places them into a secured account or a Certificate of Deposit (CD). You then make payments on the loan—plus interest—throughout the full duration of the loan’s terms. Once the loan is fully paid off, you can access the money in the secured account or CD as a lump sum. That sum will include the initial amount of the loan, plus any interest earned over the loan period. Essentially, this type of loan forces you to save money while also giving you an account that requires monthly payments. Those payments are then reported to the major credit bureaus and serve as a way to establish credit.
Explore Your Options at Resource One Credit Union
At Resource Credit Union, we are proud to offer numerous options to help people start building their credit. To find out what option is best for you, or to get tips on how to build your credit once you have a credit card, visit us today. Whether you are looking for a Resource One Credit Union near Dallas or a Resource One Credit Union near Houston, you can find our branches by checking the “Locations” page on our website.