How to Get a Credit Card with No History

It looks like the classic “Catch-22:” You can’t get a credit card with no credit history, but you can’t get the credit history you need, without some kind of credit. There are several options open to consumers that want the benefits of a credit card, but have yet to establish any kind of track record of borrowing. Credit cards can be beneficial because they are convenient and flexible.

No History Credit Cards

All borrowing is reported to the three main credit reporting bureaus, Experian, Equifax and TransUnion. These three companies maintain a record of loans, credit cards and overdraft accounts. Most importantly, a record of negative activity is tracked monthly. The Fair Isaac Corporation uses the records to calculate a FICO credit score that credit lenders use. Lenders use the rates to determine interest rates and loan terms.

Lending is all about risk. The less risk you pose, the lower your interest rates, and the better your loan terms. With no history, credit card companies in the past simply rejected your application. But over time the industry became more competitive and skilled at finding ways to get you a card and manage their risk.

Among the first and the simplest ways developed for you to get a credit card with no credit history is the no-history credit cards. These cards were designed for first-time borrowers and young adults just starting their work life. They have high interest rates, steep late-payment penalties and might have an application fee. However, despite those disadvantages, they are an easy method of building your credit history

Secured Credit Cards

Another way to get a credit card with no credit history is by putting down collateral, which, again, reduces the risk to the lender. If you run up a bill you can’t pay, it can be offset by money you place in an account managed by the credit card company. These are called secured credit cards.

Unlike the no-history credit card, the terms will not be as restrictive and rates will be better, but you do lose the use of your security payment.  The security payment is returned after several months of card use and timely payment schedules. Typically, 12 to 18 months is the barometer for these cards. After such period, the lender may offer an unsecured card offer.

Store Cards

Often, major department stores will offer a proprietary card that will allow you to establish a credit history. These cards are simply a MasterCard or Visa credit card branded with the store’s logo. You still can find store charge cards that allow you to build a payment history with them. Often, these are easier to obtain than a credit card with no credit history.

Student Cards

The credit card industry has become so competitive; they will try to build customer relationships as soon as a prospective borrower turns 18. Many companies offer a student credit card with no credit history. It will have a low spending limit, high interest rate and strict terms. The company hopes to identify good credit card users and convert them to long-term cardholders.

Alternatives to Credit History

If you have a track record of managing a checking account well or have established an automatic overdraft account, your bank or credit union can be a good place to get a credit card with no credit history. They will view your good financial habits as a substitute for credit history.