How do I get a credit card if I have no credit history?

It’s the classic catch-22. You can’t build credit without having credit, and you can’t get credit as a student without a credit history. So where do you start?

Nowadays, credit is required for almost everything from getting a cell phone, to renting an apartment and applying for a car or student loan. Fortunately, one of the best times to build credit is when you’re still in school. Here’s what you need to know when applying for your first credit card.

Apply for a student credit card

Your credit score is made up of a variety of factors. One of the most important factors is your credit history. If you are a student with a limited credit history, or currently have no debt or credit, your credit score will be low because the credit bureaus have no way to gauge your ability to repay loans or pay your bills on time. However, contrary to what you may think, one of the best ways to build your credit is to apply for and responsibly use a credit card.

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Find the best credit card for you

It’s important to keep in mind that not all cards are the same. Each credit card comes with different rates, features, benefits and fees. If you plan to pay your balance in full every month, look to maximize your rewards with a student rewards card. With some student rewards cards, you can earn cash back on every purchase and more. Rewards caps or other exclusions may apply. If you think you will carry a balance, it’s important to look for a low interest credit card. Several student credit cards offer a 0% APR introductory offer for 6-8 months. This will help you pay off large purchases over time and avoid paying interest during the introductory period. Make sure to research all of your options to find a card offering the most benefits like a low interest rate, no annual fee, cash rewards and a reasonable credit limit. You should also pay close attention to the billing cycles to make sure you understand the payment policies so you can avoid any potential fees. Many student credit cards also offer free online financial tools to help you track and manage your spending.

Getting approved for a credit card

The CARD Act of 2009 placed strict limitations on companies issuing credit cards to minors. Now, you must be at least 18 to apply for a credit card. If you are under 21, to get approved for a credit card, you must provide proof of your independent income or assets to show that you will be able to make the minimum payment amount on the card. Otherwise you will need to have a co-signer or become an authorized user on your parent’s, guardian’s or another adult’s account who is over the age of 21. If you have a job, even if it’s part-time, you may have enough independent income to get approved for a student credit card on your own. However, it’s important to remember that it will be your full financial responsibility to pay the credit card bill every month.

Co-sign credit card vs. Authorized credit card user

Having a co-applicant provides the opportunity to build your credit and learn to maintain the credit card responsibly so you can become an independent borrower in the future. When you apply for a credit card with a co-applicant, you are opening a joint account where both parties are liable for payment. Applying for a credit card with a co-applicant allows you to have a credit card in your own name, and if you are unable to pay your bills, your co-applicant will be responsible for making payments. Therefore, failure to pay or missing a payment can affect both of your credit scores.

If you are added as an authorized user on another person’s account, you can enjoy the benefits of using the card without the official financial responsibility of paying the credit card’s balance. In some cases, if you have an insufficient credit history or bad credit, becoming an authorized user can help you build credit because the account history may be reported on your credit report.

Secured Credit Card

When a traditional card is not an option available to you, a secured credit card* can be a great solution to building the good credit you need to ultimately obtain a traditional credit card. A secured credit card requires that you put down a deposit. After that, the card works similarly to a traditional credit card and unlike prepaid or debit cards, allows you to build credit because your activity is reported to the credit bureaus.

Check with the issuer

If you are or planning to be added as an authorized user to an account to build your credit, make sure to check with the issuer and credit bureaus to ensure the account is being reported on your credit report. If you want to apply for a credit card in your own name, but think you may need a co-applicant, check with the issuer to see what the application process involves. It may be a matter of submitting an application and letting the issuer decide whether a co-applicant is necessary.

Learn to use your credit card responsibly

A credit card is a great financial tool to help you manage your money and build a budget. Avoid over-spending by only making small purchases you are able to pay for, and make sure to pay off the balance each month. To avoid missing a payment, make sure to sign up for email or text reminders and enroll in automatic bill payment to ensure you pay on time. This is a simple way to improve your credit by establishing a history of paying on time.

* Discover reports your credit history to the three major credit bureaus so it can help build your credit if used responsibly.  Late payments, delinquencies or other derogatory activity with your credit card accounts and loans may adversely impact your ability to build credit.

Discover card believes that consumers should be armed with the information they need to help them make informed credit decisions.

Legal Disclaimer: The articles and information provided herein are for informational purposes only and are not intended as a substitute for professional advice.

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