If you are a recent entrant into the credit market and are looking for a credit card, your options might be limited. But even if you have no credit history, you do have a range of beginner credit cards to choose from. But you have to thoroughly research the market to get the best terms and conditions, including the lowest possible APR, low transaction fees and minimal penalties for late payments.
Use the FREE credit card finder to pick the best beginner credit card and start the process of building your credit history!
The most important function of a beginner credit card is to help you build a great credit score. Towards that end, make sure you get a credit card with the lowest APR possible, lowest fees and charges. If you can find a credit card that gives you some rewards in addition, you have found the right beginner card. But you must remember that beginner credit cards have higher interest rates and low credit limits.
The Need to Build Your Credit History
According to myFICO, all consumers have three FICO scores given by three separate and independent credit bureaus: Experian, TransUnion, and Equifax.
These three major credit rating bureaus determine your credit score on the basis on your credit history: your payment history, your debt-to-income ratio, your revolving balance, your missed payments or any reports to debt collection agencies. This credit worthiness is then used to determine your credit limit, your credit card APR, and other terms and conditions.
MSN Money says that, between 2010 and 2011, a larger percentage of the population increased their FICO scores using a variety of methods such as paying down debt, making timely payments, and lowering consumption. As a result, credit card companies are now offering better terms and conditions to such cardholders.
Better credit card APR, lower fees, lower balance transaction fees, and excellent perks are reasons to strive for a gold plated credit score.
Additionally, MSN Money states that credit scores are being used by employers before hiring, insurance companies before setting premiums and landlords before renting.
In short, the three-digit-score is of utmost importance in your financial life, and need to be carefully built, and strenuously protected.
How to Build Your Credit Score
If you have no credit history, you are starting with a clean slate. While this might present hurdles in getting the best credit card deal on the market, it is still better than working with a poor credit rating that is marked with payment delinquencies.
The following steps will help you build a strong credit score:
- Open a bank account. This lends you financial credibility especially if you meet all the requirements put forth by the bank. Sometimes your bank might offer you a credit card associated with your account.
- Get a secured credit card, which will require you to deposit a sum that becomes your personal credit line. Using it sensibly will show the credit bureaus that you are capable of financial responsibility. Make sure that your payments are being duly reported to the credit rating agencies.
- Become an authorized individual on someone else’s account. Make sure that the account is in good standing and that you are being reported as an authorized individual on the card.
- You can also apply for a small individual loan from your bank. If you have steady employment and enough financial wherewithal to make the payments, this will substantially increase your credit score.
- Always make your payments on time and in full, if possible.
- Do not assume that the credit card company is reporting your transaction and payment details to the three credit reporting agencies. It is your responsibility to make sure that the reports are being submitted in a timely fashion.
- Finally, get a responsible, high-credit score co-signer for your credit card. This will substantially boost your creditworthiness. But remember that the co-signer status remains active for up to ten years.
Terms for a Beginner Credit Card
Like any other credit card, the terms and conditions depend on the credit card company. But in most cases, no-credit-history individuals, who are considered risky debtors, make applications to beginner cards.
If your application is approved, it is highly likely to come with higher credit card APR that can sometimes go as high as 25%, annual fees and limited line of credit.
The chances of approval increase substantially if you can find a co-signer with a decent credit history.
If your credit application is denied, you have the option of getting a secured credit card. A secured credit card needs you to make a security deposit that will determine your credit limit. This usually starts at $100 and can go up to $1000. Most secured credit cards are offered with annual fees, ranging between $30-$100.
With these options to build an impressive credit history, the ideal beginner credit card usually comes with higher APR and annual fees. Assuming that you use your credit card responsibly by making prudent purchases that you can pay off in full and on time, you will slowly see an increase in your FICO scores. Such financially responsible behavior will allow you to get better credit card terms and conditions, as time goes by.
How to Get the Best Beginner Credit Card
The credit card market has a reasonable number of options for people with no credit history. But it is important to understand all the terms and conditions of beginner credit cards so that you can make an informed decision.
Fortunately, you can compare various beginner credit cards online using the FREE credit card chaser tool and start your journey towards the hallowed 700+ scores!