Fortunately, there are some available credit cards for people with no credit history. To protect them, many credit card companies deny applications of individuals who have bad or no credit. The good news is that some companies will give you a chance, and even if they don’t, there are other options for building up your credit.
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Although it may seem harsh, having your credit card application denied may be a good thing for you. If you are new to credit cards, the terms and fees can be confusing and misunderstood. If you are not financially responsible, there is a good chance using a credit card will result in a lot of debt.
What are the benefits of having a credit card?
In general, having a credit card is a good thing. Credit cards, when used correctly, can actually be great financial tools. For many people they are used for protection against financial emergencies. If anything unexpected comes up and you don’t have the funds for it, a credit card can be a good thing on which to fall back.
A credit card can also be a good tool to use if you are purchasing something big. You can charge it to your credit card and pay it off in payments, although the fewer payments the better.
Credit cards are also very convenient to use. It is a quick way to check out and they are welcome to use on most online websites to make purchases. Most online stores do not allow payments by check or especially by cash.
Why do credit card companies use credit history to determine card eligibility?
In the past, credit card companies used to accept pretty much anyone who applied for a credit card. This is no longer the case. Credit history is one of the ways that companies determine whether to issue you a credit card or not.
One of the biggest things that credit history shows is how financially responsible an individual is. A credit history shows whether an individual pays bills when they are due, if there are any skipped payments, if there are any collection agencies after them, and what the individual’s debt-to-income ratio is.
After analyzing your credit history, you are given a credit score. A credit score can fall between 300 and 850, with a higher score being better. Based off your credit score, the credit card company will determine whether to approve you for a credit card, what interest rate to charge you, and what your credit limit will be.
If you have no credit history, your credit score will more than likely be low. Although it takes time to build up your history and score, there are a number of ways to do so. For tips on how to improve it, check out this article from SmartMoney.
What credit cards are you eligible for with no credit history?
If you have no credit history, there may be very few credit cards that you will be approved for and you may not be satisfied with the terms. Some credit card companies may approve you for a card if you have a co-signer, such as a parent, or if you can prove a sufficient income to pay your bills.
Often if you are approved for a card, you will be charged an annual fee. More than likely, your credit limit will be low, and you may have a higher interest rate than if you had good credit score.
If you are approved for a credit card, make sure to read the fine print before you accept it. For tips on understanding the fine print, visit the website for MyMoney.
What if you are not approved for a credit card?
If you apply for credit cards and are not accepted, you should look into secured credit cards. These are usually available through your bank or credit union.
With these cards, the credit line is secured either by an account of yours, such as a savings account, or by an amount that you put on the card. It works similarly to a debit card or gift card, but the credit card reporting agencies see your activity with the card the same they would with a credit card. A secured card allows you to be financially responsible while building up credit over time.
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