One of the best ways to build credit is to get a credit card and use it responsibly. But many credit card providers will turn you down if you have little to no credit history — a frustrating catch-22.
However, there are some types of credit cards that are designed for individuals with a limited credit history and strategies that could increase your approval odds.
In this article, we’ll discuss tips on how to get a credit card when you don’t have a credit history, so you can start building credit and a strong financial foundation.
Can you get a credit card with no credit history?
Getting approved for a traditional credit card when you don’t have a credit history can be challenging.
However, many banks and other financial institutions issue cards specifically targeted at people with a limited credit background. These cards have more lenient eligibility criteria than traditional ones, making them easier to get approved for.
Keep in mind that these typically have much lower credit limits and higher APRs, the annual percentage rates you’ll pay on any balance you carry. Additionally, only a select few will provide bonus rewards or cash back for your purchases.
Despite these drawbacks, these cards are stepping stones that can help you build credit, and when used wisely — that is, staying below your limit and paying on time — they can help you become eligible for some of the best credit cards out there.
How to get a credit card with no credit
1. Compare cards that accept people with a limited credit history
Look for credit cards that are geared toward people with a limited credit history. Your options will generally include student credit cards and secured credit cards. These cards accept a much wider range of applicants and often have no minimum credit score requirements.
As you compare your options, steer clear of cards that have application fees or monthly maintenance fees.
It’s best to choose a card with low or no annual fee. But if you’re interested in one that has a yearly fee, make sure to examine its list of benefits and see if they make up for its cost.
When it comes to APRs, it’s important to remember that credit cards offer variable rates that fluctuate according to market conditions. However, if you pay your bill in full each month, you can avoid interest charges altogether.
2. Get an additional source of income
Besides your credit score, lenders also consider your income during the credit card approval process. Taking on a part-time job or side hustle to increase your income can improve your chances of getting approved for a card — even if you have no credit history.
Some additional income sources you may consider are freelance work or gig economy platforms like Uber, Lyft, TaskRabbit and Upwork. You could also consider selling products on an online marketplace like eBay or Etsy.
3. Become an authorized user on someone else's credit card
Becoming an authorized user on a loved one’s card can be a great option for people who are starting to build their financial independence. When you’re an authorized user on someone else’s card, their payment history is added to your credit report. This could improve your credit score if the primary cardholder makes timely payments. If they don’t, however, it could have a negative impact on your score.
5. Pre-qualify first
Many card issuers offer a pre-qualification process to check if you meet the eligibility criteria for a specific credit card.
During pre-qualification, a lender will typically request details such as your income, employment status and debt-to-income ratio. The process can be completed online in a few minutes, and applicants might receive details about the card terms, such as the potential credit limit and interest rates.
Note that pre-qualification doesn’t mean guaranteed approval, but it does indicate you have a good chance of qualifying once you submit an application.
6. Apply for a credit-builder loan
Some banks and other financial institutions offer credit-building loans specifically designed to help people establish or improve their credit history. These loans generally involve taking out a small installment loan, ranging from a few hundred to a few thousand dollars. Every time you make an on-time payment, you’ll get a positive entry on your credit report, helping to improve your creditworthiness over time.
The funds are typically held in a savings account or a certificate of deposit as collateral, so you can’t access them until you fully repay the loan. Once you settle the outstanding balance, the money is disbursed.
You should carefully consider the loan’s fees. Some can be expensive and charge large monthly fees or interest rates. However, many lenders reimburse the interest costs you paid.
What are the best credit cards for people with no credit?
While you’re unlikely to get approved for the best cash-back credit cards or the best travel credit cards, the following cards are great options to build a strong credit history and obtain a card with more favorable terms in the future.
Secured credit cards
Secured credit cards require a security deposit that typically also serves as your credit limit and as collateral. This deposit reduces the risk for issuers, so they’re willing to extend a line of credit to any borrower, regardless of their credit history.
Lenders will report your monthly payments to the credit bureaus as they do with unsecured credit cards, so you’ll be building credit history just as effectively if you pay on time. However, note that secured credit cards usually have higher interest rates and fees, and you probably won’t get any perks, cash-back rewards or travel points.
Student credit cards
Student credit cards are typically much easier to qualify for than standard credit cards if you’re enrolled in an accredited college, university or vocational school. These cards don’t require a security deposit, but you’ll have to provide proof of enrollment and income. You can list income from a job, scholarships or grants, allowances and more. You also must be at least 18 years old to apply.
These cards usually have lower credit limits than traditional ones, but this can increase over time as you keep up with regular repayments. Also, note that some of the best student credit cards feature benefits like cash-back rewards.
Retail store credit cards
Retail store credit cards are issued directly by retail stores or chains. Retailers often have more lenient credit score requirements, however, they often have higher APRs than other cards. Additionally, the perks they offer typically only apply to their particular brand.
Why does credit matter when applying for credit cards?
When financial institutions consider your card application, they assess your creditworthiness by examining your credit report. This is a crucial part of the application process because it allows lenders to assess your overall financial responsibility and whether you know how to pay off credit card debt on time.
Card issuers evaluate your credit score and report in order to manage their risk when making lending decisions. If you have a long and spotless financial track record, you’ll be regarded as a reliable borrower. On the other hand, if you have bad credit or no credit at all, you’ll usually be regarded as risky.
How do lenders use credit scores
Your credit history is available to lenders through centralized credit bureaus, which calculate your creditworthiness in the form of a credit score. The higher your score, the better your approval odds with lenders.
Your score is calculated using credit scoring algorithms, like the FICO® Score and VantageScore. These models take into account various financial data points, such as your payment history, the amount of available credit you’re using and the length of your credit history.
Having a good credit score can increase your chances of obtaining attractive card offers, with lower APRs, higher credit limits and potentially lucrative cash-back or rewards programs. If you have a lower credit score, your options may be more limited.
Summary of Money's How to Get a Credit Card with No Credit
Getting a credit card without an established credit history can be challenging, but there are cards specifically designed for those with limited or no credit.
These cards often have drawbacks, like higher APRs, when compared to traditional ones.
However, when used responsibly, they provide an opportunity to start building a strong payment history and establishing a good credit score. This will help improve your chances for better cards with more favorable terms and great rewards in the future.