How to Get a Credit Card with No Credit
November 17, 2017 by Marty Orefice | Credit, Financing
Credit cards, when used responsibly, can help improve your credit. As strange as it sounds, in order to have a good credit score, you need to have credit cards, but you also need to not use them too much.
There are six ways to improve your credit and credit cards impact five of them.
Paradoxically, you need credit cards to have a good credit score and you need a good credit score for a credit card company to approve you for a credit card. Even worse, applying for a credit card puts a hard inquiry on your credit, which temporarily hurts your credit score. Credit reporting agencies factor Each inquiry into your credit score for three years.
The best course of action is to strategically apply for credit cards that credit card companies are likely to approve you for. That way, you minimize the number of inquiries on your credit.
How to Get a Credit Card with No Credit?
As someone with a low credit score, credit card companies are more likely to approve you for cards with downsides. Examples of cards that are easier to qualify for are bank-sponsored credit cards that require you to have a certain amount of money secured in the bank, cards with annual fees and cards that do not offer cash back rewards.
Once you have a credit card, your credit score will begin to increase and, eventually, you can apply and qualify for cards that are more desirable.
Do Credit Cards Increase Your Credit Score?
Use your credit card the same way that you use cash or a debit card. If you do not have it in the bank, do not put it on your credit card.
To improve your credit score consistently pay the complete statement balance for your cards each month.
Even though you’re paying off the card every month, you still want to use a very small percentage of your credit. If you’re approved for a credit card with a limit of $500 a month, you never want to have more than a balance of $150 on it. The lower your balance, the better it is for your credit score.
These strategies will improve two of the key factors that impact your credit: credit card utilization and payment history.
The major credit reporting agencies want you to be using a low percentage of your credit and they want you to pay off your card on time each month. Doing so demonstrates that you are reliable because you always make your payments on time, and that you aren’t living off of your credit card.
It’s important to have a credit card because, otherwise, you have no way to demonstrate to the credit reporting agencies that you can reliably pay off loans and credit. Eventually, you want to have a few credit cards because the credit reporting agencies want to see if you can manage more than one account (i.e. can you pay multiple accounts with different pay dates on time).
When Should I Apply for a Credit Card?
It takes a while for a credit score to develop, one of the factors – a low impact one – is the average age of credit history. The older your average age of credit history, the more it helps your credit score. The more new credit cards you get, the younger your average becomes. The longer you have cards open, the older your average age becomes.
While applying for all your cards at the once and not getting new ones allows your average age of credit history to increase, you may want to hold off on getting more than one until your credit score has improved enough for you to qualify for cards that don’t have annual fees and cards that give you cash back rewards.
If you feel like you don’t need a good credit score yet, that means it’s a good time to start building it. As stated above, it takes a long time to develop a good credit score. You’ll need one for when you want to start applying for mortgages and loans.
