Credit Cards for Applicants with No Credit History

Sometimes it is hard to tell which is worse – having bad credit or having no credit history at all. Perhaps you have fallen into this perplexing situation; creditors refuse to approve you for credit because you do not have any credit history, but you cannot build a history because no one will approve you. (Almost like asking which came first, the chicken or the egg)? Getting started out in the world of credit can prove to be a challenge but is obviously quite possible. Many people begin their journey by taking out a credit card that is made specifically for folks who have not yet established credit.

Easy to Obtain

A credit card for those who have not had a chance to establish credit (like students, for instance) can be either unsecured or secured (prepaid). The unsecured option when it comes to this type of card usually features an inflated rate of interest (annual percentage rate) and may have fees associated with it just to open the account. The limit on unsecured card for those with no credit history will be very sparse – usually less than $1,000. The secured card for folks with this type of situation is also known as a prepaid credit card. In order to qualify for this, you will need to place a deposit with the card issuer in the amount that you wish your credit line to be established. For example, if you want your credit line to be $1,000, you will need to deposit that amount into your account.

Using the Prepaid Credit Card to Build Your Credit History

From the moment that you get your prepaid credit card, you have an opportunity to begin building your financial future. The steps that you take right now can determine much about your ability to borrow money, rent an apartment or qualify for your dream job, or even take out a mortgage, eventually. Use your card wisely and you will add valuable points to your nonexistent credit score that will help you meet your financial goals. Some tips:

  • Pay your balance due each month, or at least the minimum monthly payment. (Keep in mind that paying only the minimum amount due each month will cause you to pay more for your purchases because of the tacked-on interest charges).
  • Avoid urges to overspend. Stay within the limit that has been set for your account, and avoid going over at all costs.
  • Consider using your pre-paid card for regular expenses that you have that you would typically use cash for – like gasoline or food – and then pay off the balance each month in full. This makes it easy to stay within your boundaries when it comes to not overspending while giving you a convenient way to make purchases and track your expenses.