By Rick
Getting your first credit card with no credit history can be a challenging experience. It is like a catch-22 situation, since you need a credit history to secure a card and can only really develop one after you’ve had credit extended to you. In spite of this confusing situation, there are several ways for the average person to obtain a credit card with no credit as long as you take the time to understand the process.
Companies that specialize in extending credit to first timers
There are a number of credit card companies that specialize in providing credit cards to people with little or no credit. These cards are a great way to establish a credit history that will then allow you to apply for a card from a more established lender in time. Most of these “no credit history” credit cards carry a significantly higher interest rate than a standard card but if you only use the card to buy items you can afford to pay for, you can avoid carrying a balance every month and dodge these fees. Using the card regularly will help you establish a solid credit history and paying off the balance during the grace period every month will ensure a high credit score as well.
Over time the company that offers this card may increase your credit limit to allow you to use the card for larger purchases. Just be careful to not overuse the card so you never get into a situation where you can’t pay at least the minimum due each month. Missing a payment can really damage your credit history and prevent you from moving to a more established credit card later.
Pre-approvals can help sometimes, but not always
When searching for your first credit card you’ll want to choose one that you are pre-approved for if possible. The companies that send you an offer for a card like this have already done a preliminary qualification for you, which almost ensures you’ll be given a card. This is important because these inquiries are considered “soft” inquiries that won’t lower your credit score. Once you apply for the card, the company will do a more thorough credit check that will show up on your report. Knowing you have been tentatively approved will help you but that doesn’t mean your acceptance is guaranteed. The initial pre-approval is much like guesswork. You can’t rely on it.
Compare multiple credit cards
If you receive several offers for a credit card with no credit required, be sure to compare them before applying. The terms and conditions between them can vary significantly and you’ll want to find the one with the best rates and highest credit limit. Only apply for one card at a time. Since you’ll only be using this card for a short period of time to establish a credit history, you won’t need a collection of them in your wallet.
Be aware also that some of these offers for a credit card with no credit may require you to deposit money in an account to use for your purchases. In essence you are spending your own money for the purchases you make with the card. Even though you could make these same purchases with cash, by using the card you are establishing a credit history that will allow you to apply for a traditional credit card later.
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