How Can I Get an Unsecured Credit Card with No Credit History?

Qualifying for a traditional, unsecured credit card with no credit history is no small feat. When you don’t have a credit history, banks have little information to draw upon when determining whether you’re a responsible borrower worthy of credit. As a result, you may have trouble finding or qualifying for unsecured credit cards until you have built a credit history and proved your credit worthiness.

We’ll talk about some of the ways you can build your credit history in a minute. But first, let’s tackle the elephant in the room – the big question that most people without credit want answered.

How do you build credit when you can’t even get a credit card?

Alternative Credit Options for People with No Credit History

When you can’t qualify for a credit card, it’s extremely difficult to build credit. But how do you build credit when banks won’t give you a shot?

While this might seem like an impossible situation, you have several options at your disposal. First, you can consider an array of credit cards made for people with bad credit. While these cards generally come with higher fees and more hoops to jump through, they can help you build the credit you need when you’re first starting out.

If you wind up signing up for a card geared toward people with bad credit, always remember that your situation may only be temporary. If you use your card responsibly and always pay your bill on time, you’ll be able to improve your credit score over time. And after a while, you should be able to graduate from that card and qualify for one of the top rewards credit cards if that would suit your needs better.

Another option to consider is a secured credit card. With secured credit cards, you’re required to put down a cash deposit that is usually equal to your credit limit. Commonly, that means putting down a cash deposit of $500 to achieve a spending limit of $500. With this type of card, you’re putting down cash collateral that is equal to the amount of money you can spend.

While this might not seem ideal, secured credit cards are fairly easy to qualify for — after all, the bank has almost nothing to lose. And if your goal is building credit because you can’t qualify for an unsecured card, neither do you. A secured card might be your best (and only) option.

The good news is, you may only need a secured credit card for a short period of time. Once you use (and pay off) your secured credit card enough to prove your credit worthiness, you can usually upgrade it to an unsecured version or cancel it and apply for a credit card with more perks. Either way, you’ll also get your initial cash deposit back ,provided you don’t default and you repay your card’s entire balance.

How to Build Credit and Improve Your Score

While an unsecured credit card for bad credit or a secured credit card can help you get your credit off the ground at the beginning, your long-term goal should be improving your credit score enough to qualify for the top credit cards out there. Not only do the best credit cards on the market charge lower fees (or no fees) and come with better terms, many also offer rewards and additional perks to boot.

As we shared in our recent guide on how to build credit, there are five main factors used to determine your FICO score: your payment history (35% of your score), the amount of money you owe (30%), the length of your credit history (15%), new credit (10%), and your credit mix (10%).

While some of these factors may not be entirely in your control, you do have some power here. Consider these tips to improve your credit over time:

  • Pay all of your bills on time. The biggest determinant of your score is your payment history. To make the biggest positive impact on your credit score, make sure all of your bills are paid early or on time.
  • Keep debt at a minimum. Since the amount of money you owe in relation to your credit limits makes up 30% of your FICO score, you’ll want to keep debt levels at a minimum. Get in the habit of charging only what you can afford, and make sure you pay as much as you can toward your debts each month. If you’re using more than a third of your available credit — say, keeping a $500 balance on a card with a $1,000 credit limit — then paying down your balances has a nearly immediate impact on your credit scores.
  • Avoid opening or closing too many accounts. While new credit accounts can temporarily ding your credit, closing old accounts can also decrease your score. To keep your credit as healthy as possible, we suggest only opening new credit cards when you have to, and only closing old accounts if you absolutely must (to avoid an annual fee, for example).

The Bottom Line

If you want to build credit but don’t have a credit history, it can take some creative thinking to get your foot in the door. Fortunately, there are several credit products geared to people who are building credit for the first time.

In the meantime, it will pay to take special care of your credit. Pay your bills on time, avoid opening new accounts unless you absolutely have to, and avoid taking on new debts. Give it time, and your score will surely improve.

How did you build credit from scratch? Have you ever had a secured credit card?

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