Applying for a Credit Card with No Credit History
Credit cards and pre-approved credit card offers are everywhere, but approval may actually be difficult for first time applicants. Apply for a card with realistic expectations--new applicants with a limited credit history rarely receive the lowest rates.
"If you do not have a credit history, apply for a lower rate card to see if you will receive an offer. If you receive a credit card, keep it, even if the rate is high. Pay off the balance each month, then call in 6-12 months to ask for a lower rate" says Bill Hardekopf, CEO of LowCards.com "If you do not receive a credit card, do not apply for others hoping one of them will give you a chance. Multiple applications over a short time will have a negative effect on your credit report."
Lendors and credit card issuers look closely at credit reports to determine if the applicant is responsible with current debt. "Unfortunately for households without some type of debt, most consumer payments like rent, student loans, insurance, and utilities are not reported to the credit bureau unless there is a problem," says Hardekopf. "Good payment history for a credit card, auto loan or mortgage helps build your credit score."
Since credit reports influence the direction of credit, examine the credit report to find the score and to make sure all information is correct before applying for a card.
The credit bureaus have recently released a new, uniform scoring system. Here is how to use the credit score to predict the credit card offer:
901-990- Grade A- Excellent rating. Should have an easy time getting loans with the best rates.
801-900- Grade B- Good Rating. Should also have an easy time getting loans with good rates.
701-800- Grade C - Moderate risk. Lender will take a closer look at the credit report and history.
601-700- Grade D. Higher risk and higher rates.
501-600- Grade F. Highest risk. Credit options will be limited or not available.
"Don't just apply for the first card you see. Study the Terms and Conditions for each card and find the APR tiers. Using your credit score, you can reasonably guess the tier you fall into and the rate you will receive. This gives you a place to start for comparing rates," says Hardekopf. "For example, if your score is around 700, you can expect the 18.74% rate from Blue From American Express or 22.49% from Chase Cash Plus Rewards Visa."
If the application is not approved, the issuer is required to explain why. If it is a result of the credit report, the issuer must tell how to get a copy of the report from the company that provided it. The report is free if requested within 60 days of receiving the notice that the application was denied.
Here are other options for a first card:
-Ask your bank or credit union about available credit cards. If you have a checking account, then you already have a history and they may be more likely to offer you a credit card.
-Apply for a department store card or oil company card. These are easier to get than a Visa or MasterCard charge card. Many times applications are processed instantly. Keep in mind the interest rates for these are higher, so pay off the balance each month.
-Apply for a secured card. Secured cards are easier to get because there is no risk to the issuer. An upfront security deposit for the secured card determines the credit limit. The secured card has few application requirements: a US resident with a valid SSN and a home telephone. Look for a secured card that will offer an upgrade to an unsecured card after a record of on-time payments.
Before applying for a department store card or a secured card, verify that payment activity is reported to the credit bureau. These cards will not build credit scores if they do not report to the credit bureaus. Use a department store or secured card correctly, and a good payment history should be built in 6-12 months. Responsible usage will also increase the odds of qualifying for a major
credit card.
"It seems illogical to recommend this, but the best time to get the first credit card is during college. Credit card companies want to establish early loyalty so they target students. This is a good risk because they realize that parents will usually bail their kids out of any debt problems. However, this is recommended only if the card is used responsibly and paid off each month," says Hardekopf.
"If you do not have a credit history, apply for a lower rate card to see if you will receive an offer. If you receive a credit card, keep it, even if the rate is high. Pay off the balance each month, then call in 6-12 months to ask for a lower rate" says Bill Hardekopf, CEO of LowCards.com "If you do not receive a credit card, do not apply for others hoping one of them will give you a chance. Multiple applications over a short time will have a negative effect on your credit report."
Lendors and credit card issuers look closely at credit reports to determine if the applicant is responsible with current debt. "Unfortunately for households without some type of debt, most consumer payments like rent, student loans, insurance, and utilities are not reported to the credit bureau unless there is a problem," says Hardekopf. "Good payment history for a credit card, auto loan or mortgage helps build your credit score."
Since credit reports influence the direction of credit, examine the credit report to find the score and to make sure all information is correct before applying for a card.
The credit bureaus have recently released a new, uniform scoring system. Here is how to use the credit score to predict the credit card offer:
901-990- Grade A- Excellent rating. Should have an easy time getting loans with the best rates.
801-900- Grade B- Good Rating. Should also have an easy time getting loans with good rates.
701-800- Grade C - Moderate risk. Lender will take a closer look at the credit report and history.
601-700- Grade D. Higher risk and higher rates.
501-600- Grade F. Highest risk. Credit options will be limited or not available.
"Don't just apply for the first card you see. Study the Terms and Conditions for each card and find the APR tiers. Using your credit score, you can reasonably guess the tier you fall into and the rate you will receive. This gives you a place to start for comparing rates," says Hardekopf. "For example, if your score is around 700, you can expect the 18.74% rate from Blue From American Express or 22.49% from Chase Cash Plus Rewards Visa."
If the application is not approved, the issuer is required to explain why. If it is a result of the credit report, the issuer must tell how to get a copy of the report from the company that provided it. The report is free if requested within 60 days of receiving the notice that the application was denied.
Here are other options for a first card:
-Ask your bank or credit union about available credit cards. If you have a checking account, then you already have a history and they may be more likely to offer you a credit card.
-Apply for a department store card or oil company card. These are easier to get than a Visa or MasterCard charge card. Many times applications are processed instantly. Keep in mind the interest rates for these are higher, so pay off the balance each month.
-Apply for a secured card. Secured cards are easier to get because there is no risk to the issuer. An upfront security deposit for the secured card determines the credit limit. The secured card has few application requirements: a US resident with a valid SSN and a home telephone. Look for a secured card that will offer an upgrade to an unsecured card after a record of on-time payments.
Before applying for a department store card or a secured card, verify that payment activity is reported to the credit bureau. These cards will not build credit scores if they do not report to the credit bureaus. Use a department store or secured card correctly, and a good payment history should be built in 6-12 months. Responsible usage will also increase the odds of qualifying for a major
credit card.
"It seems illogical to recommend this, but the best time to get the first credit card is during college. Credit card companies want to establish early loyalty so they target students. This is a good risk because they realize that parents will usually bail their kids out of any debt problems. However, this is recommended only if the card is used responsibly and paid off each month," says Hardekopf.
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