For credit card companies, a person with no credit history is a giant question mark – a virtual unknown. They use the information from the credit reporting bureaus to determine a person's level of risk when considering them for a credit card. If you have no credit history then you have no information on record for them to consider. They have no way of knowing what kind of financial sense you have. Still, there are options for obtaining a credit card when you have no credit history.
Before you even try to get your first credit card, you should understand how credit operates. It will help you in trying to get a credit card and help you in building a good credit history. The first thing a credit card company considers when reviewing an application is the person's credit score. A credit score is a point value that the credit reporting bureaus assign each person. A credit score ranges from 600 to 800. A person with no credit has a score of 600 not because they have practiced bad credit habits but because they have no credit activity. The better a person's credit activity the higher their score. Understanding their scoring system helps you realize that good credit is something earned, not just some unrelated number assigned to a person.
Likewise, a person with bad credit practices is penalized with a low credit score. Therefore, getting approved for a credit card is the first step towards building up your credit score. The next steps are based on your ability to use your credit card wisely. Using a credit card wisely and building a good credit rating and history will help you beyond the world of credit cards. Good credit card practices can help you get approved for other forms of credit, such as auto loans and home mortgages. Good credit ratings can also qualify you for lower interest rates on these types of loans.
Obtaining a credit card with no credit history will most likely have some extra requirements beyond the standard credit card offered to those with good credit. Just consider the following three issues when shopping for a credit card:
1. APR – Most credit card offers to someone with no credit will have a higher interest rate than the industry standard. Some of these interest rates could be as high as 30%. Just remember if you only use your card for small purchases and pay the bill in full on time then you won't be buried by high interest rates. Just use the card as a tool towards the goal of building good credit. Once you have raised your credit score you can obtain a credit card with lower rates.
2. ANNUAL FEES – For someone with no credit history, an initial credit card offer will require paying an annual fee for use of the credit card. These fees normally average about $50. Be watchful for cards whose fees greatly exceed this norm.
3. CREDIT LIMITS – A beginning credit card will usually have a very low credit limit. The limit can be as low as $250. This low limit protects the credit card issuer if the applicant turns out to be a bad credit risk. However, good credit practices can mean that after six months you can request and usually receive a credit limit increase.
There are numerous credit card offers on the internet that consider those with no credit history. You can try for an unsecured card, a secured card, or a bad credit credit card. The following five credit card have offers that seem favorable towards those with no credit:
- Capital One Secured Master Card
- First Premier Bank Classic Credit Card
- HSBC Bank of Nevada's Orchard Bank Visa Card
- HSBS Bank of Nevada's Orchard Bank Classic MasterCard
- Centennial Classic Credit Card
These are not the only financial institutions that consider those with no credit history for credit cards. They are just a starting point for finding a credit card that will help a person with no credit history develop some positive credit. If these offers don't appeal to you or meet your needs, then continue shopping around and find that card that meets your needs and is willing to give you your chance to start on the road to having a good credit history.
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