Getting your first credit card is a huge adult milestone just like getting your first car or your first bank account. The problem is, it can be difficult to get approved for a credit card just because you want one.
While that may seem unfortunate and even unfair, banks rely on your credit history, credit score, and other factors to decide whether you are creditworthy. With no credit card and no credit history to speak of, they may not be able to assess how responsible you are.
At this point, you may be wondering how you’ll ever get your own credit card. How can you give someone to give you a chance when you haven’t had an opportunity to prove yourself?
Fortunately, there are several ways to prove your creditworthiness slowly with some limitations. Here are your best options:
Become an Authorized User
Whether you’re ready to apply for your own credit card now or want to prepare yourself for when you are, becoming an authorized user on a responsible person’s credit card account can help in more than one way. As an authorized user, you’ll have a card you can use and repay through the primary cardholder. More importantly though, all the credit balances and monthly payments will be reported to your credit report, thus creating a credit history.
While becoming an authorized user doesn’t come with a lot of risk for you, the person who adds you to their credit card account is taking a big chance since they are ultimately responsible for repaying any amounts you charge up. For that reason, you should only ask to become an authorized user if you know you can use credit responsibly without putting someone else’s credit at risk.
Ideally, you’ll use the card sparingly, pay back what you owe every month (if anything), and act as an authorized user for the primary purpose of building a credit history.
Loan Money to Yourself
In lieu of becoming an authorized user, some companies let you lend money to yourself in a way that builds credit. That’s exactly how the process works for consumers who use Self Lender. This online company allows you to take out a short-term loan and make payments that are invested into a short-term Certificate of Deposit (CD).
You don’t actually receive the amount of the loan; however. You simply pledge to make payments in a certain amount that are invested into a CD, and you get the money you paid in plus a nominal amount of interest back when the process is complete.
Self Lender requires only $12 for an administration fee to open a loan, but you will have to pay some interest within each payment. The best part is, Self Lender reports all your payments to the three credit reporting agencies — Experian, Equifax, and TransUnion — so you can build your credit history and score in one fell swoop.
Pick Up a Secured Credit Card
Another option many credit newbies try is signing up for a secured credit card. Unlike unsecured credit cards that don’t require collateral, secured credit cards require you to put down a cash deposit that is usually equal to your credit limit. If you put down $500 to open your account, for example, your credit limit would be in the $500 range.
You may be wondering why you would bother with a secured card considering you have to pay to use it. While secured credit cards do require a cash deposit, you’ll get your money back provided you don’t default on your account and you eventually upgrade or cancel your card. The deposit is simply used as collateral in case you charge up your card and don’t pay your bill, but you’ll see your money again if you use your secured credit card responsibly.
Also note that, unlike unsecured credit cards, it’s fairly easy to qualify for a secured credit card regardless of your credit score. Secured credit cards also report your credit payments to the three credit reporting agencies, allowing you to build credit when you have none.
While there are a ton of secured credit cards out there to choose from, make sure to consider the Secured Mastercard® from Capital One. This card comes with no annual fee and no foreign transaction fees, and you may be able to get a boost to your credit limit after five on-time monthly payments are made.
Consider a Student Credit Card
If you’re a college student who is ready to wet your feet in the world of credit, you can also consider a student credit card. This type of product is geared to young people with thin credit profiles and little history, and you may be able to qualify even if your credit score is low.
Keep in mind, however, that most student credit cards offer a low credit limit — especially at first. They also tend to come with fewer perks and cardholder benefits, especially when it comes to travel.
But, that doesn’t mean that student credit cards can’t help you earn rewards. For example, the Discover it® Student Cash Back lets cardholders earn 5% in categories that rotate each quarter up to a certain limit (then 1%). You also get 1% back on all your regular purchases, and Discover will double all the cash back you earn within the first year. This card doesn’t have an annual fee either, so it’s a great option for anyone just starting out.
The Bottom Line
Before you give up on getting a credit card, remember that it takes time to build credit and trust. The strategies above can help you get your foot in the door to start building credit, and it may not take long to achieve a score that can help you qualify for premium credit cards with the rewards or cardholder perks you really want.
Don’t let poor credit or no credit stand in the way of your goals. With a few simple steps, you could be on your way to building good credit in no time.
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.