The average American credit score tends to fall somewhere in the 700s. However, every one of those credit holders started off with no credit at all. What’s their secret? They know how to find the right credit card for new credit accumulation.
Here we will be diving in and sharing with you some important facts about credit along with which cards work for those with no credit at all. Read on to start building your credit today.
What is Credit?
Before learning about how to build your credit it’s important to know what credit actually is. Many people believe credit is a magical number that determines whether or not you can buy a house, a car, or qualify for a personal loan. However, it’s much more than that.
Your credit score is an “at a glance” referral that lenders will use to determine how likely you are to pay off the loan. The more you stick to contractual agreements for money borrowed the better your credit score will be.
However, the eternal dilemma here is that you have to start with credit in order to apply for the things that help you build your credit. Which is why many turn to credit cards that require to help them get started.
Why is Credit Important?
The harsh reality is, in the US, credit checks are used by practically every major financial institution. That means to grow as a family or business and make the purchases you need, at one point or another someone will be analyzing your credit score to see if they should give you the money you need.
In addition to money loans, there are other parties that may check your credit to determine how well you handle responsibilities and commitments. This may include potential landlords or even potential employers.
Myths About Establishing Credit
Since credit is something virtually everyone has to build, there’s no end to peoples opinion on “the right” way to build credit. As a result, a number of myths have arisen that we don’t want you to fall for. Some of these myths include:
All Debts Affect your Credit Score Equally
Not quite, maxing out a credit card in one go is likely to be more damaging than a late payment on your personal loan no credit check. Even if the amount is the same.
You Can Hurt Your Credit Score By Checking It
Like most myths, this one is built on a bit of truth. It depends on the source of your inquiry. If you are checking your credit score to apply for a credit card or a potential loan, then it’s the placing of the application that may hurt the score. However, simply checking it out won’t hurt it.
Close Your Credit Card to Help Your Score
In theory, it would make sense, however, one of the major pillars of building credit is the repeated process of borrowing and repaying the money. If you close your credit card then you will lose all of the history associated with the cards that you’ve had open for so long. In fact, one of the factors credit scoring companies take into account is “age” of accounts. So make sure you keep your oldest cards open!
Ways to Establish New Credit
Many people looking to build credit from scratch find themselves at a loss. How do you build credit if all credit institutions check your credit before giving you a loan? Trust us when we say you are not the first to be frustrated by this conundrum.
Fortunately, there are a number of ways to begin to build your credit without having any credit to start with. Some of these methods include:
- Opening a secured credit card
- Applying for a credit building installment loan
- Getting a Co-Signer with Good Credit
- Being added on as an authorized cardholder on someone else’s card
- Using your rent payments to build your credit
If you use these methods, it’ll be easy to get started building credit the right way.
Most Common Credit Card Mistakes
First, bravo for taking the initiative to build your credit. It’s one decision you won’t regret. However, it’s important to avoid some common pitfalls when attempting to build your credit.
Some of the most common credit mistakes are:
- Only making the minimum payment on your monthly payment.
- Making payments too late.
- Letting someone else borrow your credit card.
- Not paying attention to your credit card statements
- Allowing your credit card to get charged-off
- Not reporting a lost or stolen card as quickly as possible.
- Hitting your card limit
- Applying for too many credit cards in one go.
- Not Knowing the terms of your credit card.
Do any of these sound familiar?
What to Look for in a Credit Card
Another mistake that many people new to credit building make, is being too eager to jump on a credit card simply because they don’t require any credit to start.
While the prospect to get your first credit card in hand is exciting, slow it down. Many credit loaners count on this excitement and in the end, you can actually damage your credit with interest in fees. Read on to learn what to specifically look for in a credit card before applying to it.
Annual Percentage Rate
The annual percentage rate (or APR) of a credit card is one of the first things you’ll want to check before applying for the card. The APR is amount of interest you’ll be paying on a monthly basis in case you don’t pay off the loan in full. This is just like taking out a payday loan online every month, and watching the interest accrue on a monthly basis.
Even if you intend to pay promptly month after month, life has a tendency to happen. You don’t want to be stuck with a bulk fee for being late one month.
Another consequence of not paying your balance each month is having to pay the minimum amount. The good news here is that the average minimum payment on a credit card is about 3%.
However, you’ll find that some credit cards hold minimum payments that are even higher than this.
Some credit cars will tack charges on top of your charges, so it’s important to be clear on this from the get-go. While this is unlikely to happen as a regular occurrence it can happen in the event that you use your card internationally, go over your usual credit card limit, or if you find yourself paying late on the card.
Since these individual charges can quickly add up, it’s important to know where they will occur. For example, if you travel often you will want a credit card without international charges or at least with the minimum fees.
Introductory Interest Rates
Some cards make you earn better interest rates by “proving your loyalty”. This means your interest can be quite high for the first 3-6 months of earning your card and then will gradually decline as time goes on.
Often this tactic is used by credit companies that know you are more likely to switch to another credit card once you have built up your credit. Know what your interest rates will be and how long they will be that way ahead of time.
Not all factors in choosing the right credit card are negative. Many credit cards now offer loyalty or reward points for using their card. The trick is to find the points or rewards programs that are geared towards the places you spend the most money.
Many cardholders choose cards that give them reward points on things like gas, airline tickets, and even from their favorite stores. Try aiming for a card that offers rewards points on a large variety of locations to really get the most out of the program.
Sometime’s you’ll need to pull some cash off of your credit card. However, practically every credit card has a fee for taking cash off of your card. In some cases, the fee is so high that cardholders will avoid withdrawing cash at all costs.
In addition to a withdrawal fee, you may also find that there is a “limit” to the amount of cash you can take out in one go. This limit can be based upon how high your credit line is, or how regular you have been with your payments.
Finding the Best Credit Card for New Credit
Now that you know what to look for in the best credit card, it’s time to review your best credit card options for no credit. Below you will find our choices for building new credit in some important areas including deposit requirement, annual fee, and even applying as a student.
Be sure to compare an evaluate each card and check them in accordance with the criteria listed above. Since you are just starting out with your credit you’ll want to do whatever you can to avoid hurting it.
Best Credit Card with No Deposit
Some credit cards require you start with a deposit, typically around $150-$300. However, if you are looking to build credit fast and are starting out with nothing to put in, you’ll need a credit card that doesn’t require a deposit.
In this area, we recommend the Capital One Quicksilver Once Credit Rewards Card. This card has a fairly low annual fee and late fee along with no max over limit fee making it a solid option for those starting out.
Best Credit Card with No Annual Fee
If you’re choosing to stay with your card for some time (which is essential to building strong credit) you can expect those annual fees to add up quickly, which is why it’s worth looking into cards require no annual fee. Our top choice in this area is the Capital One Platinum Credit Card with zero annual fees.
The card also holds a fairly low late fee of $38 along with no over limit fee, no penalty APR, and no foreign transaction fee, making it a fairly safe bet.
Best for Anyone with No Credit
While there are a number of options available for those with little or no credit, it’s important that not all cards are created equal. we held various cards up to the standards listed above, and OpenSky Secured Visa Credit Card came out as a clear winner.
This card won’t hit you with anyone time fees or monthly fees and even provides a grace period of 25 days. Not to mention that 99% of cardholders that started off with no credit were able to earn a credit score within 6 months.
Best For Students with No Credit
If you’re a student looking to build credit it’s important to know that there are a number of programs just for you with additional perks. Among these specialty student credit card programs for students, we found the Journey Student Rewards from Capital One card to be the best choice.
This card is a clear winner thanks to zero annual fee, balance transfer fee, max over limit fee or foreign transaction fee. That card also allows for a 3% cash advance and a grace period of 25 days.
Always Compare Cards
When in doubt always take the time to compare cards. Review the areas above and how each card applies, but most importantly be honest with yourself and know which features will be most important to you and your lifestyle. Be sure to put extra emphasis on any interest-free periods, or interest charges as this tends to be where cards differ the most.
If you are having trouble nailing down some clear information on your card or determining which is better, you can always utilize the many card comparison websites online.
How to Apply for a Credit Card
Congrats! You’ve found a card you love that requires zero credit. Now, it’s time to apply and see if you can get it a cozy place in your wallet. There are several ways you can typically apply for a credit card. These methods include:
- Through the credit companies website
- By mailing in your application
- By submitting an application over the phone
- By submitting an application through your bank
Which method you choose will have no bearing on how likely you are to be approved. Once your application has been reviewed you will be notified as to whether or not it’s been approved, sometimes the response will be immediate in other cases it can take 3-5 business days.
Adding Additional Card Holders
If you have been approved, you may find that you want to add additional cardholders onto your card so they can use it without identity problems arriving. First, it’s immensely important that you trust the individual won’t abuse the limits of your card and will pay you for it promptly to not affect your credit. In some cases, it may help to have a written agreement in place.
If you feel it’s a good idea to add another individual on, you can typically do this by calling your card company directly and having them add the individual on.
Taking Control of Your Financial Health
Finding the right credit card for new credit is one of the many steps you can take to begin building a solid financial situation. The more you learn and grow in these steps the better your credit and savings situation will be.
We suggest checking out our blog on bad credit vs. no credit to learn more about some important steps to take to achieve a strong credit score. Here are some other articles you might find helpful:
Payday loan with a prepaid debit card – how to get one when you only have a debit card
Credit cards for bad credit with no deposit
The best unsecured credit cards for bad credit you can get now
Can you get cash off credit cards? Here are 7 things to know