Some New Options To Build Credit For Those with No Credit History
The old adage of “it takes credit to get credit” is most apparent when applying for your first credit card. Having no credit is better than having bad credit, but it can still create a frustrating experience. Thankfully, there are some upcoming industry changes designed to help applicants with limited credit history.
The startup Petal just secured $13 million in new funding to build their Visa credit card. Instead of examining an applicant’s credit score, Petal looks at a person’s financial stability—bill payments, savings accounts, job security and income. If an applicant can prove strong money management skills, he or she can qualify for a $500 to $10,000 line of credit from Petal.
Petal’s benefits extend beyond the easy application though. According to their website, “Petal is the first credit card with absolutely no fees. No overdraft fee, late fee, international fee, annual fee, or any-other-kind-of fee.” If cardholders pay off their credit card balances by the end of the payment cycle, they will not be charged any interest either. If they choose to make payments in installments, they can see how much money they will pay in interest each month on their mobile dashboard.
Petal has not officially launched their first credit card, but they do have a beta version available by invitation only. Interested applicants can sign up on PetalCard.com to join the waitlist.
A similar card known as Deserve is also made for people with limited credit. There are three models to choose from: Deserve Edu for college students, Deserve Classic for applicants with no credit history, and Deserve Pro for applicants that already have credit history. Deserve Pro has a cash back rewards program and a credit line of up to $10,000.
Petal does not offer a rewards program on their card, but for good reason. The company says, “We believe that traditional credit card rewards can be confusing, hard to use, and sometimes encourage overspending.” Users have a better chance at building a positive credit history if they are not worried about spending extra money to maximize their rewards.
If you have little or no credit history, you also have the option of getting a secured credit card. Secured cards function like traditional cards, but you have to put the money down for your credit line. For example, if you put a $1,000 deposit on your card, you would have a $1,000 line of credit. You could use the card like normal and pay back the balance at the end of the month, including any interest or fees you may have accrued. The credit card company will report the positive payments to boost your credit score.
Paying for credit may sound like a hassle, but is one of the easiest and most effective ways to increase your score and expand your credit portfolio. Once your credit is strong enough to qualify for a traditional card, you can cancel your secured credit card and get a full refund of your deposit.