Having no credit is not the same as having bad credit. Young people just starting out have no credit because they have no credit history. Many things go into building credit. Paying utility bills, medical bills, and other recurring bills on time starts the process of building credit. One of the quickest ways to build credit is to get a credit card that you can use and pay off until a credit history can be established. The problem is that it can be hard to get a credit card without a credit history.
College students and young people who are still dependents for their parents tax returns have an easy access to a credit card.
Many credit card issuers will allow a parent to add a child to their account with the new card being in the child’s name. The parent is ultimately responsible for the payment, but the credit reporting will go out in the child’s name. As long as the parent has sufficient credit to qualify, the child can get a credit card with no credit. It is important that the payment be made on time each month for the new credit to be strong.
Get a co-signer for the credit card.
This basically amounts to finding someone who will allow you to add their name and good credit to your credit card application. The card company will consider the income and credit history of both applicants when issuing the new credit card. With your credit essentially being a blank, the card will be granted based on the credit of the second applicant. If you fail to make your payments, the second person can have their own credit tarnished. Because of this, some people are reluctant to enter into this type of agreement. Close family members will usually do this for a loved one.
Open up the account with a specific store or vendor.
These credit cards may only be usable at the store that issued the card. Because of this, store credit cards can have lower credit requirements. They also have very low credit limits of perhaps only $200. These store will submit reports to the major credit bureaus to build your credit history. Some stores farm out the maintenance of the account to Visa or MasterCard. This will give you a card that may be accepted at many retailers. Stores may hold your account for a year or two before upgrading your card, or it may happen immediately.
Apply for a card backed by a cash deposit.
This type of card is not as friendly as a traditional credit card. You must deposit $500 or $1,000 into an account. You then have have “credit limit” that matches your deposited amount. Each month, your payments replenish this fund. A card like this can be an asset if you need to rent a car or list a credit card on some type of application. However, these cards frequently come attached to large annual or monthly fees that must be paid to keep the card active.
These companies will report your payment history to the credit bureaus. So, there are some benefits to the cards. Mostly, these credit cards are issued to people who have very bad credit rather than those with no credit.